Japan’s Topix index fell for the first time in five days on concern the Federal Reserve will reduce stimulus if the U.S. economy continues to improve and as data suggested China’s manufacturing shrank more than expected.
Developers and energy explorers lost the most among the Topix’s 33 industry groups. Fanuc Corp., which supplies robotics to Chinese factories, slid 3.2 percent. Most exporters fell, with Toyota Motor Corp., Canon Inc. and Bridgestone Corp. dropping at least 1 percent even as the yen weakened for a fourth day. Mizuho Financial Group Inc. (8411), Japan’s third-largest lender by market value, added 0.5 percent after it was upgraded to buy at Goldman Sachs Group Inc.
The Topix (TPX) lost 1.3 percent to 1,091.81 at the close of trading in Tokyo, with volume about 36 percent below the 30-day average. All but five of its industry groups retreated. The Nikkei 225 declined 1.7 percent to 13,014.58.
“The Fed announcement yesterday was within expectations,” said Tomoichiro Kubota, a market analyst at online brokerage Matsui Securities Co. “But there are concerns about the outlook for global liquidity and foreign investors are withdrawing capital, leading to a triple drop in stocks, bonds and the yen in Japan.”
Japan’s 10-year bond yield added 3 basis points to 0.85 as of 3:49 p.m. in Tokyo, while the yen weakened 1 percent to 97.45 per dollar. Futures on the Standard & Poor’s 500 Index fell 0.5 percent. The gauge yesterday lost 1.4 percent in New York, the most in two weeks.
Stocks fell as Fed Chairman Ben S. Bernanke said yesterday the central bank may reduce bond purchases later this year and end them by mid-2014 “if the incoming data are broadly consistent” with forecasts. The Federal Open Market Committee left bond buying unchanged at $85 billion, while saying downside risks to the economy and labor market have diminished.
“Ben is preparing the market and, as ever, scribes will go over his every word and punctuation mark,” said Stuart Beavis, head of institutional equity derivatives at Vantage Capital Markets in Hong Kong. “We could easily see a reversal in market fortunes. He has stopped the uncertainty that markets hate. Just be prepared, Bernanke is telling us over a two-year view there is a real chance of higher rates.”
In another drag on shares, data today suggested China’s manufacturing contracted more than expected, adding to signs the country’s slowdown is deepening. The preliminary reading for a Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics was 48.3, compared with the 49.1 median estimate of 15 economists surveyed by Bloomberg News. A number below 50 indicates contraction.
Fanuc (6954), which counts Asia excluding Japan as its biggest market, dropped 3.2 percent to 14,200 yen, the second-biggest drag on the Nikkei 225.
Hitachi Construction Machinery Co., which gets 12 percent of its revenue in China, slumped 5.3 percent to 2,065 yen.
Toyota dropped 1 percent to 5,810 yen, Canon slipped 1.1 percent to 3,215 yen and Bridgestone fell 1.5 percent to 3,270 yen. Electrical appliance producers and carmakers were the biggest drags on the Topix even after the yen weakened.
Mizuho gained 0.5 percent to 195 yen after Goldman Sachs raised the lender to buy from neutral, citing improved capital adequacy and moves to reduce strategic shareholdings.
Most regional gauges fell. The MSCI Asia Pacific Index dropped 3.5 percent to 128.46 as of 3 p.m. in Tokyo, its lowest since Dec. 26. Hong Kong’s Hang Seng Index tumbled 2.7 percent, heading for a nine-month low. The Hang Seng China Enterprises Index of mainland stocks listed in the city slipped 3 percent.
The Tokyo Stock Exchange Mothers Index of smaller companies bucked the trend, adding 1.3 percent after retreating 3.6 percent yesterday.
The Topix has fallen about 14 percent from an almost five-year high on May 22. Shares have declined amid a strengthening yen, disappointment about Prime Minister Shinzo Abe’s growth strategy and concern global stimulus will be reduced.
The Topix has swung an average of about 3.2 percent daily since May 22. The gauge’s 30-day historic volatility was at 41.23 today, near its highest level since the 2011 earthquake and tsunami.
Even after the recent fall, the Nikkei 225 and Topix are still up more than 25 percent this year, retaining Japan’s position as the best-performing major equity market.
The Topix may rise to 1,300 by the end of the year, according to the median estimate of 17 strategists surveyed by Bloomberg. Earnings for companies on the gauge will jump 53 percent this fiscal year to 78.85 yen a share, according to analyst estimates compiled by Bloomberg.
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