Bloomberg News

Japanese Stocks Decline Before U.S. Elections on Earnings

November 06, 2012

Japanese stocks fell for a second day amid low volume as investors await the results of the U.S. presidential election and as companies from Dainippon Screen (7735) Manufacturing Co. to NTN Corp. (6472) unexpectedly forecast losses.

Dainippon Screen plunged 16 percent to lead declines on the Nikkei 225 Stock Average, while bearing-maker NTN sank 7.3 percent. Makita Corp. (6586), a power-tool manufacturer that gets more than 40 percent of its sales in Europe, lost 2.6 percent amid speculation Greece will fail to secure a loan pact next week. Utilities rebounded from declines yesterday that came amid disagreement about earthquake risk at the nation’s only operating nuclear plant.

“Japanese corporate earnings aren’t good and deteriorating economies in Europe and China are likely to have an impact on that,” said Seiichiro Iwamoto, who helps oversee about $34 billion at Mizuho Asset Management Co. in Tokyo. “The market is starting to worry about Europe’s debt issues again. Talks on Greece’s bailout are dragging on.”

The Nikkei 225 (NKY) fell 0.4 percent to 8,975.15 at the 3 p.m. close in Tokyo. Volume on the gauge was about 15 percent below the 30-day average ahead of the U.S. election today. The broader Topix (TPX) Index lost 0.4 percent to 744.88, with more than two shares dropping for each that gained.

The Topix has risen 3.6 percent since Sept. 6 after the European Central Bank started a global wave of stimulus to boost growth, with the U.S. Federal Reserve and the Bank of Japan following suit. Shares on the equity gauge trade at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index.

Futures on the S&P 500 added 0.1 percent today. Voting starts today for Americans deciding between giving President Barack Obama another four years in office or changing course with Republican challenger Governor Mitt Romney.

Greek Bailout

Exporters to Europe fell after a official from the Group of 20 nations said a Nov. 12 meeting of finance ministers from the monetary union may fail to deliver an agreement necessary to unfreeze Greece’s bailout.

Makita lost 2.6 percent to 3,210 yen. Sony Corp., which depends on Europe for a fifth of its sales, slid 1.8 percent to 897 yen.

Dainippon Screen and NTN are among 551 of the 1,675 Topix companies post earnings results this week. Of the 264 companies on the gauge which have reported quarterly revenue since Oct. 1 and for which Bloomberg News has estimates, 65 percent have missed projections.

Dainippon Screen

Dainippon Screen plunged by its daily limit of 80 yen, or 16 percent, to 406 yen. The chip-equipment maker reversed its full-year forecast to a loss of 14 billion yen ($175 million) from a 500 million-yen profit and canceled its planned annual dividend of 5 yen per share. The company cited lower capital investment across the sector for the results.

NTN, a bearing maker that supplies automakers including Toyota Motor Corp. and Nissan Motor Co. tumbled 7.3 percent to 140 yen after saying it expects a loss of 7 billion yen in the year ending March 31 amid slumping demand and a strong yen. The company had earlier forecast an 11 billion-yen profit.

Shipping companies declined the most among the Topix’s 33 industry groups. Kawasaki Kisen Kaisha Ltd. (9107), Japan’s third- biggest shipping line by sales, sank 5.6 percent to 102 yen after Standard & Poor’s placed the company’s long-term credit and debt ratings on CreditWatch with negative implications.

Nippon Yusen K.K. fell 3.2 percent to 152 yen, while Mitsui O.S.K. Lines Ltd. slid 2.1 percent to 186 yen.

Kansai Electric

An index tracking utilities gained 3.7 percent, the most on the Topix, after falling 2.5 percent yesterday as a decision was delayed on the future of Kansai Electric Power Co.’s Ohi nuclear plant as seismologists from the Nuclear Regulation Authority disagreed over whether a fault line under the site is active.

The team studying the fault will meet tomorrow to discuss the matter with the power station’s operator, said Kunihiko Shimazaki, a commissioner at the regulator. Kansai Electric jumped 7.5 percent to 618 yen after falling 6.8 percent yesterday. Chubu Electric Power Co. soared 7.6 percent to 935 yen.

“Shares bounced back today after a selloff yesterday that was really unwarranted given the fact that the decision on whether to keep running the Ohi plant comes tomorrow,” said Hideyuki Suzuki, a senior market analyst at Tokyo-based brokerage SBI Securities Co.

The Nikkei Stock Average Volatility Index (VNKY) rose 1.4 percent to 19.32, indicating that traders expect a swing of 5.5 percent on the equity benchmark in the next 30 days.

To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

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


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