TOKYO, Apr 16: Japan’s Nikkei share average dropped to a one-week low on Tuesday, but the market pared some of its losses by the midday break, with the mood soured by concerns over stumbling global growth and the worst day for U.S. Stocks in five months.
Index heavyweight SoftBank Corp slumped 8.9 percent after U.S. Dish Network Corp offered to buy wireless service provider Sprint Nextel Corp for $25.5 billion, which could trump the Japanese firm’s bid for a 70 percent stake for $20.1 billion.
SoftBank was the top-weighted loser and the third-most traded stock on the main board by turnover. If it were to finish the day with such loss, it would mark its biggest one-day percentage drop since Oct. 12, a day after Sprint said it was in talks on potential sales to SoftBank.
By the midday break, the Nikkei was down 140.16 points at 13,135.50, managing to hold above the 13,000-mark, after earlier hitting a one-week low of 13,004.46.
It was on track to fall for a third day in a row, which will mark its longest such losing streak in nearly three months as the benchmark has rallied more than 26 percent this year on the back of aggressive government and central bank policies to revive the world’s third-largest economy.
Nicholas Smith, Japan strategist at CLSA, said he remained upbeat on Japanese stocks and expected another 30 percent upside for the Nikkei.
‘They started off incredibly cheap. They are still cheap,’ he said. ‘There is a substantial upturn in the economy and conditions for Japanese companies.’
The BOJ shocked the financial markets on April 4, with bolder steps that even eclipsed the U.S. Federal Reserve’s massive quantitative easing program, promising to inject $1.4 trillion into the economy in less than two years.
In terms of valuations, Japanese equities carry a 12-month forward price-to-earnings ratio of 13.3, slightly below the S&P 500’s 13.5, data from Thomson Reuters Datastream showed.
In recent sessions, concerns about soft data from China and the United States have heightened worries about the global growth outlook. Investors in Japan have used this period to book gains after the market surged to near five-year highs last week.
Chinese growth stumbled unexpectedly in the first three months of 2013, while data showed the pace of growth in New York state manufacturing slowed more than expected in April and U.S. Homebuilder sentiment waned for a third month in a row.
Sentiment was also dimmed by two simultaneous explosions at the Boston Marathon on Monday, killing two people and injuring dozens.
U.S. Stocks extended their losses as the news weighed on already jittery markets. Overnight, gold led a broad rout for commodities on growth worries, dropping 9 percent to mark its biggest loss since 1983.
BANKS, EXPORTERS FALL
Stocks that have rallied hard on the back of the BOJ’s sweeping stimulus took a battering on Tuesday, with the banking sector, which is seen benefiting from Japan’s reflationary drive, down 3 percent.
Lenders Mitsubishi UFJ Financial Group fell 3.5 percent, and Sumitomo Mitsui Financial Group eased 3 percent.
The broader Topix index dropped 1.8 percent to 1,113.16 after the morning session, with volume at 70 percent of its full daily average for the past 90 trading days.
Apart from concerns of weakening global demand, exporters also faced pressure from the yen’s rebound. The Japanese currency was quoted at 97.06 yen to the dollar on Tuesday after gaining 1.7 percent to 96.725 in the previous session.
Exporters Toyota Motor Corp, Canon Inc, Nissan Motor Co, Sony Corp and Sharp Corp lost between 1.4 and 6.5 percent.
Automakers were the most ‘appealing’ sector among investors, according to a Nomura poll of individual investors from April 1 to 2, just before the BOJ announcement, while electrical and precision equipment makers were the most ‘unappealing’.
‘With the exception of automobiles, all of the sectors seeing marked improvements were domestic-demand and defensive sectors,’ it wrote in a note. (AGENCIES)
Follow our WhatsApp channel