Bloomberg News

Japan’s Topix Falls Fourth Day on Greece Euro Exit Risk

May 14, 2012

May 14 (Bloomberg) -- Most Japanese stocks fell, with the Topix Index sliding for a fourth day, as European officials began to weigh Greece’s possible exit from the monetary union. Losses in stocks were limited after China moved to spur growth by cutting the amount of capital banks must keep in reserve.

Mitsubishi Motors Corp. (7211), an automaker that gets 27 percent of its sales from Europe, lost 3.6 percent. Sumitomo Electric Industries Ltd. slumped 5.7 percent after the maker of electric wires and cables forecast net income that missed estimates. Fanuc Corp. (6954), a maker of automation controls used in Chinese factories, gained 1.8 percent.

The Topix lost 0.2 percent to 756.68 at the 3 p.m. close in Tokyo, with more than three stocks dropping for each that rose, after advancing as much as 0.6 percent earlier. The Nikkei 225 Stock Average (NKY) added 0.2 percent to 8,973.84 after dropping 4.6 percent last week, the biggest weekly loss since August.

“Investors find it hard to make a move with uncertainty over Europe, especially Greece,” said Takuya Yamada, a Tokyo- based senior portfolio manager at ITC Investment Partners Corp., which manages about $750 million. “China’s reserve ratio cut is a plus for investor mindsets, but the market isn’t reacting much because its impact on the economy is limited.”

The Nikkei 225 has retreated 12.5 percent from this year’s high on March 27 as China’s economic growth slowed and on renewed concern about Europe’s debt crisis. A Greek backlash at the polls against austerity measures has led to speculation the nation will become the first to exit the monetary union. Euro- area finance ministers will meet in Brussels today while Europe’s central bankers continue to discuss the possibility of a Greek departure and how to handle the fallout.

Valuation Comparison

The decline has brought the value of stocks on the Topix to 0.9 times book value, compared with 2.14 for the Standard & Poor’s 500 Index and 1.39 for the Stoxx Europe 600 Index. A value less than one means investors can buy companies for less than the value of their assets.

Companies that do business in Europe fell. Mitsubishi Motors slid 3.6 percent to 80 yen. Nippon Sheet Glass Co. (5202), a glassmaker that gets the highest percentage of revenue generated in Europe on the Nikkei 225 Average, lost 3 percent to 96 yen.

Losses were limited after the People’s Bank of China said on May 12 that it is cutting the amount of capital that banks must set aside for the third time in six months to support lending after a report showed inflation slowed last month. Reserve ratios will fall 50 basis points effective May 18.

‘Soon Take Action’

“China has relied on the reserve ratio to loosen policy, but they may soon take action with interest rates,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has $412 billion in assets. “Expectations for China’s policy are causing a rebound.”

Fanuc advanced 1.8 percent to 13,600 yen. Komatsu Ltd. (6301), a construction machinery maker that generates 14 percent of its sales in China, rose 0.1 percent to 2,054 yen after falling as much as 0.5 percent.

Futures on the S&P 500 fell 0.3 percent today. The index slid 0.3 percent in New York on May 11, declining for a second week, on European political concern and after JPMorgan Chase & Co.’s $2 billion trading loss weighed on banking shares.

Among other stocks that fell, Sumitomo Electric slid 5.7 percent to 975 yen. The cable maker’s shares declined after it forecast 70 billion yen in net income for the year ending March 31, lower than 80.8 billion yen estimated by analysts.

Takeda Pharmaceutical Co., Asia’s leading drugmaker, lost 3.2 percent to 3,290 yen after reporting net income plunged 50 percent to 124.2 billion yen in the year ended March, missing estimates of a 142.8 billion yen gain. Takeda cited costs related to its acquisition of Nycomed for the result.

Trading volume on the Nikkei 225 was 12 percent above the 30-day average. The Nikkei 225 Volatility Index (VNKY) fell 3.6 percent to 21.90, indicating traders expect a swing of 6.3 percent on the benchmark gauge over the next 30 days.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net

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


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