Nikkei falls after China move
Japan’s Nikkei average fell 0.9 percent on Wednesday, hurt by profit-taking and a strong yen, while resource shares slipped after China’s decision to start tightening monetary conditions sparked concerns the move might slow demand.
China surprised world markets by raising banks’ reserve requirements, the strongest of a series of step toward tightening monetary policy, in response to increasing concerns about its economy overheating.
“The Japanese stock market had become overheated following a big rally since December. On top of that, we now have China’s decision to raise banks’ reserve requirements,” said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.
“It’s hard to think the move would hinder China’s economic recovery, but the news likely led some risk money to close positions for now.”
The benchmark Nikkei shed 98.62 points to 10,780.52 after closing at a 15-month high on Tuesday. The broader Topix dipped 0.6 percent to 948.52.
Analysts noted that the Nikkei, which is hovering around 15-month highs, had been overbought and was poised for profit-taking even before the China news broke after Tokyo market hours on Tuesday.
The Nikkei’s relative strength index (RSI) on Tuesday rose to 72. Over 70 is considered overbought territory, so market players said some downward adjustment — particularly in resource shares, which have gained recently — was only natural.
CHINA-LINKED STOCKS DOWN
The China move spurred selling in shares of metal stocks as commodities prices fell on concern that the country’s purchases of natural resources might slow, while construction machinery firms, which have a big presence in China, also came under pressure.
Ferronickel producer Pacific Metals lost 4.3 percent to 688 yen, smelter Toho Zinc declined 2.9 percent to 464 yen and fellow smelter Dowa Holdings shed 3.5 percent to 524 yen.
Komatsu Ltd, the world’s second-biggest maker of earth-moving machinery, slid 2.5 percent to 2,043 yen and Hitachi Construction fell 2.3 percent to 2,508 yen.
Both gained sharply just a day before following strong Chinese data that boosted expectations of strong demand.
Toyota Motor Corp and other exporters slipped after the dollar fell more than 1 percent against the yen on Tuesday. It was roughly flat at 91.05 yen on Wednesday.
Toyota retreated 1 percent to 4,075 yen, while electronics parts maker Kyocera Corp slid 1.8 percent to 8,360 yen.
Japan Airlines tumbled to a record low of 7 yen, the second consecutive day it has fallen by its daily limit of 30 yen, on growing expectations the airline is headed for bankruptcy and a delisting from the Tokyo exchange, but analysts said its impact on the overall market was negligible.
Best Denki Co Ltd plunged 18.3 percent to 282 yen after the consumer electronics retailer said its full-year net loss is likely to be more than 20 times bigger than previously forecast, as it plans to book charges from closing up to 30 percent of its stores and from folding its struggling subsidiary.
Source: Reuters