Bloomberg News

Japanese Stocks Decline Second Day After Fed Offers No New Stimulus

December 14, 2011

Japanese stocks edged lower for a second day after the U.S. Federal Reserve offered no new measures to spur growth. Losses were limited amid speculation shares are cheap.

Sony Corp. (6758), which depends on the U.S. for a fifth of its sales, fell 1.5 percent. Nexon Co., a South Korean maker of online games that started trading in Tokyo today, dropped after Japan’s biggest initial share offering this year. Olympus Corp. (7733) pared losses of as much as 19 percent as the scandal-hit company met a deadline today to report earnings and avoid being delisted.

The Nikkei 225 Stock Average (NKY) fell 0.4 percent to 8,519.13 at the 3 p.m. trading close in Tokyo. The broader Topix Index slid 0.5 percent to 736.98 after the Fed refrained from offering another round of large-scale asset purchases to buoy the economy.

“Nothing came out of the Fed meeting and that’s negative for the markets,” said Shintaro Takeuchi, a portfolio investment manager at Tokio Marine & Nichido Fire Insurance Co., which oversees the equivalent of $111 billion. “Still Japanese stocks (TPX) are cheap so the downside impact should be limited.”

Futures on the Standard & Poor’s 500 Index (SPXL1) rose 0.3 percent today. The index dropped 0.9 percent in New York yesterday after a report showed U.S. retail sales gained last month at the slowest pace since June.

The Fed said yesterday the U.S. economy continues to expand even as global growth slows. Chairman Ben S. Bernanke and his colleagues reiterated a warning from the Fed’s two previous meetings that “strains in global financial markets continue to pose significant downside risks to the economic outlook.”

Sony, Honda Drop

Exporters to the U.S. fell, with Sony dropping 1.5 percent to 1,365 yen. Honda Motor Co. (7267), which counts the North America as its biggest market, slid 2.2 percent to 2,331 yen. The automaker was rated “underweight” in new coverage at Morgan Stanley, which said “it remains to be seen whether Honda can lead the industry in fuel economy.”

Stocks also declined after German Chancellor Angela Merkel signaled she doesn’t support expanding the size of a planned permanent rescue fund for Europe. Merkel told German lawmakers that a 500 billion-euro cap on the fund will stay in place, two officials with knowledge of the discussion said.

“Germany won’t strengthen its support unless there’s a consensus that its own economy and financial institutions will be hurt by what happens in the rest of the region,” said Hitoshi Asaoka, a senior strategist in Tokyo at Mizuho Trust & Banking Co. “There still isn’t a sense of shared destiny.”

Nexon’s Down Debut

Nexon, an online game creator that’s more profitable than Zynga Inc., fell 2.3 percent on its first day of trading to 1,270 yen from its initial offering price of 1,300 yen per share. Like Zynga, which is set to go public tomorrow, Nexon earns revenue by letting consumers play games for free and charging them for virtual goods, including costumes for characters.

Rival DeNA Co., which operates the Mobage gaming site, dropped 4.3 percent to 2,277 yen. Gree Inc. (3632), a social-network website operator, fell 2.7 percent to 2,597 yen.

Olympus, which had delayed its second-quarter earnings report amid an accounting scandal, filed results today, meeting a deadline that allowed it to avoid automatic delisting from the Tokyo Stock Exchange. The stock fell 4.1 percent to 1,314 yen, after plunging as much 19 percent.

Japanese companies this year have had share prices hit by more than Europe’s sovereign-debt crisis. The yen’s rise to a postwar high against the dollar and disruptions to production from floods in Thailand and the country’s worst earthquake on record have sent the Topix down about 18 percent since January, compared with a 19 percent decline on the Stoxx Europe 600 Index.

The decline has cut the price of shares on the Topix to 0.89 times estimated book value, near the lowest since March 2009, according to Bloomberg data. Almost 70 percent of the companies on the listed on the index are trading below book value, according to Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc.

“There’s increasing appetite for dip-buying,” Nishi said. “Stocks probably won’t drop much lower.”

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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