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Nikkei slides broadly before earnings; JAL falls

Published 10/22/2009, 02:35 AM
Updated 10/22/2009, 02:36 AM
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* Pause in gains inevitable as earnings priced in - analysts

* JAL drops on report of bigger loss, KDDI falls on downgrade

* Bank shares slide in wake of New York peers

By Elaine Lies

TOKYO, Oct 22 (Reuters) - Japan's Nikkei average fell 0.6 percent on Thursday, with stocks hit across the board after U.S. financial shares fell after a warning from a banking analyst and as wariness grew ahead of Japanese earnings.

Japan Airlines Corp snapped this week's rising streak to drop 3.2 percent after a newspaper reported that the struggling carrier's net loss may balloon to as much as about $5.5 billion for the year ending in March.

Bank shares slid as well after rising earlier this week.

"There's been a tendency this earnings period for U.S. shares to fall even if their results are fairly positive, and investors are worried the same thing may happen here," said Takashi Ushio, head of the investment strategy division at Marusan Securities. "Plus given worries about a stronger yen, some investors wonder if the second half might not be as good as this one. They want to sell while things are still good."

The benchmark Nikkei shed 66.22 points to 10,267.17, paring losses that took it down as much as 1.7 percent at one point. The broader Topix fell 0.6 percent to 908.60.

"The market lacks energy and there are few reasons to buy Japanese stocks, particularly because the new government's policies have yielded little results so far," said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities.

"But at the same time, falls should be limited as the global economy is on track for a recovery and as global stocks are on an upward trend. Investors also want to see how Japanese earnings will pan out."

Japan's earnings season will swing into full gear next week.

Some downward pressure also emerged from falls in other Asian markets, with Hong Kong and Chinese stocks weighed down by concerns about inflation and possible monetary tightening ahead after economic data came in strong.

China's economy surged 8.9 percent in the third quarter, but the outcome was widely expected, giving investors little to trade on.

The MSCI index of Asia Pacific stocks outside Japan lost 1.3 percent.

BANKS SHADOWED BY U.S. FALL

U.S. stocks fell on Wednesday as Wells Fargo slid after Rochdale Research analyst Richard Bove cut his rating on the stock saying loan losses were mounting, though it was among several banks posting quarterly earnings above Wall Street's forecasts.

Japan's banks weakened in tandem, analysts said. Mitsubishi UFJ Financial Group, Japan's top lender, lost 3.1 percent to 472 yen and No. 3 bank Sumitomo Mitsui Financial Group fell 2.7 percent to 3,220 yen. Mizuho Financial Group lost 2.2 percent to 177 yen.

The Nikkei business daily reported that both Honda Motor Co and Toshiba Corp were likely to post a profit for the April-September first half.

The reported income figure for Honda would be below consensus estimates while those for Toshiba would beat them.

Honda gained 1.8 percent to 2,830 yen, while Toshiba shot up 3.3 percent to 564 yen.

JAL shares fell to 122 yen after climbing earlier this week on a sense they had been oversold during a tumble last week. The Yomiuri newspaper said the struggling carrier plans to book hefty restructuring charges.

The Nikkei business daily also reported that a government-appointed task force crafting a revival plan for JAL has asked the Development Bank of Japan to provide more than 50 billion yen ($550 million) in debt waivers and debt-for-equity swaps.

"Until a final decision has been made, we really just don't know about it all," said Ushio at Marusan Securities.

"But fundamentally, the government just can't let a company like JAL collapse."

KDDI fell 4 percent to 484,000 yen after Citigroup Global Markets Japan cut its rating on Japan's No. 2 phone operator to "hold/medium risk" from "buy/medium risk" and lowered its target price to 550,000 yen from 650,000 yen.

Analyst Hiroshi Yamashina said he saw little in the way of share price catalysts.

Trade was moderate on the Tokyo exchange's first section, with 2 billion shares changing hands, in line with last week's daily average.

Declining stocks outnumbered advancing ones by nearly 2 to 1. (Additional reporting by Aiko Hayashi; Editing by Chris Gallagher)

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