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Nikkei hits 8-wk closing low as politics weighs

Published 07/13/2009, 02:52 AM
Updated 07/13/2009, 03:00 AM
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* Nikkei falls, hurt by growing political uncertainty

* PM Aso set to call election on Aug. 30

* Mood also fragile ahead of U.S. earnings, on yen strength

* Kirin jumps on news Suntory considering merger with Kirin

By Aiko Hayashi

TOKYO, July 13 (Reuters) - Japan's Nikkei average slid 2.6 percent to its lowest close in eight weeks on Monday, hurt by growing political uncertainty after news that embattled Prime Minister Taro Aso is set to call a general election for Aug. 30.

But Kirin Holdings Co jumped nearly 8 percent and other brewers rose after Suntory Holdings Ltd said it was considering a merger with Kirin, which would create one of the world's largest beverage and food firms.

Japan's Aso plans to call a general election on Aug. 30, a top ruling party official said on Monday, despite prospects that his long-ruling conservative party is headed for a big defeat.

"The news may have prompted some investors to hold back buying on dips as they expect instability either way. It's hard to imagine a new stable administration that could spark hope and push up the market," said Mitsushige Akino, chief fund manager at Ichiyoshi investment Management.

A fall in other Asian markets and U.S. stock futures also pushed Japan's benchmark lower, market players said.

In active trade, the Nikkei dropped 236.95 points to 9,050.33, its lowest finish since May 18. The index has been sliding for nine days, losing 9.1 percent.

"After the Nikkei average easily broke below its 75-day moving average of around 9,260, its next target will now be 9,000," said Kenichi Hirano, operating officer at Tachibana Securities.

"But the 200-day moving average of around 8,800 will still likely form support for now."

The broader Topix declined 2.3 percent to 852.42.

Market analysts also said that market sentiment was already cautious ahead of upcoming corporate earnings releases and on the yen's resilience against the dollar, which will hurt earnings prospects for exporters.

Closely watched earnings releases this week include those from Goldman Sachs and Intel on Tuesday, JP Morgan Chase on Thursday and Bank of America on Friday.

BREWERS SHINE BUT EXPORTERS SLIDE

Kirin jumped 7.8 percent to 1,392 yen. Other brewers advanced amid speculation that a deal between Kirin and Suntory would trigger consolidation in the sector, with Sapporo Holdings climbing 6.1 percent to 536 yen and Asahi Breweries Ltd rising 2.5 percent to 1,395 yen.

Wine producer Mercian Corp, a subsidiary of Kirin, shot up 5.2 percent to 202 yen.

Exporters fell as investors warily eyed the yen, which rose to a five-month high against the dollar below 91.80 yen on Friday. The currency retreated to near 93.00 yen early on Monday before drifting back to 92.50 yen.

Sony Corp shed 2.9 percent to 2,165 yen and electronics parts maker Kyocera Corp lost 3.4 percent to 6,560 yen. Toyota Motor Corp slipped 1.5 percent to 3,380 yen.

But shares of Honda Motor Co rose 0.6 percent to 2,370 yen, after its new chief executive said the company plans to launch its CR-Z hybrid sports car in February next year, as it aims to bring more hybrid models to market quickly to tap growing demand.

Kenedix Inc, a unit of U.S. real estate investment and services firm Kennedy-Wilson, tumbled by its daily limit of 4,000 yen, or 11.1 percent, to 32,200 yen after Nikko Citigroup cut its rating on the stock to "hold/high risk" from "buy/high risk".

Among other notable stocks, Daiichi Sankyo advanced 2.4 percent to 1,702 yen after U.S. health officials approved Eli Lilly and Co and Daiichi Sankyo's blood thinner Effient after several delays, and the companies said they would launch the drug "in the coming weeks."

Some 2.4 billion shares changed hands on the Tokyo exchange's first section, above last week's daily average of 1.9 billion.

Declining stocks outnumbered advancing ones by more than 11 to 1. (Editing by Joseph Radford)

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