TOKYO, Sept 3: Japan’s Nikkei average fell to a four-week low on Monday on concerns over a sharp slowdown in China, although comments from US Federal Reserve Chairman Ben Bernanke that the Fed was prepared to boost the economy offered some support.
By the morning break, the Nikkei was down 0.4 percent at 8,805.26, on track for a third straight losing session but holding above its 75-day moving average at 8,766.88.
The Nikkei China 50 index, made up of Japanese companies with significant exposure to China, lost 0.7 percent, with construction machinery maker Komatsu Ltd falling 2 percent and industrial robot maker Fanuc Corp down 1.1 percent.
China’s official factory purchasing managers’ index—an early indicator of the state of the economy—fell to a lower-than-expected 49.2 in August, the first time since November 2011 that the number has fallen below 50, which separates expansion from contraction.
Concerns over China’s growth have been hurting raw material prices and resources-related shares.
Steelmakers were the worst sectoral performer on Monday, down 2.5 percent, while the mining sector dropped 2.4 percent and shippers fell 2.1 percent.
‘For now, any kind of macro indicators from China are still deteriorating … The market is not pricing in future fundamentals. Everybody is expecting in the October-December period the Chinese economy will recover,’ said Shun Maruyama, chief Japan equity strategist at BNP Paribas.
Maruyama said the rebound in the Nikkei in August was largely driven by short-covering, pushing down the short selling ratio to around 24 percent, but he expected investors would start buying put options and selling futures this month.
Although Bernanke stopped short of providing a clear signal on further monetary policy easing, his comments were enough to bolster bets that the Fed was closer to offering more stimulus, providing some support to the market.
Hopes for another round of stimulus and action by the European Central Bank to bring down punishingly high borrowing costs for Spain and Italy helped push the Nikkei from a trough on July 25 to a three-month high on Aug. 20.
September tends to be the weakest month for the Nikkei, with an average monthly drop of 1.2 percent between 1971 and 2011.
The broader Topix index eased 0.2 percent to 730.32 on Monday. Trading volume during the morning session was relatively light, at 43 percent of its full daily average for the past 90 days.
‘You definitely have got to be concentrating on the domestic market at the moment. Within that you want to be taking a look in some of the banks, some real estate, some retail names,’ said Nicholas Smith, Japan strategist at CLSA.
‘Within exporters they are not all one. There are big problems in consumer electronics … But auto is still probably the biggest conviction of the year … Fantastic valuations, demand has been strong. Last year was annus horribilis (after the massive earthquake disruption to the supply chain), this year is getting back on track.’
SHARP SHARES BATTERED
Embattled TV maker Sharp Corp sank 6.1 percent and was the most traded stock on the main board by turnover after credit rating agency Standard & Poor’s cut its debt rating to ‘junk’ status after the market close on Friday and kept the firm on negative watch for a possible further downgrade.
In another bearish sign, short-selling in Sharp was on the rise again, with 92.33 percent of its stock available to be borrowed out on loan as of Aug. 30, up from a near three-week low of 87.63 percent on Aug. 27, according to data provider Markit.
Swimming against the tide, Nomura Holdings advanced 2.7 percent after Japan’s top investment bank said it is cutting an additional $1 billion in costs in the second major restructuring of its loss-making overseas operations in less than a year.
Other gainers included Astellas Pharma Inc, which rose 3.5 percent after the U.S. Food and Drug Administration approved a novel prostate cancer drug developed by Medivation Inc and Astellas.
($1 = 78.3000 Japanese yen)
(agencies)
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