* Construction equipment makers fall on Nomura downgrades
* Key support at 9,500 breached
* Nikkei's immediatesupport seen at 9,405.19 - trader
* Solar shares up on govt renewable energy plan
* Buying back of utilities helps trim losses-fund manager
By Antoni Slodkowski and Ayai Tomisawa
TOKYO, May 23 (Reuters) - The Nikkei average fell to a five-week low on Monday after hedge funds unwound positions in construction machinery makers, spurred by Nomura Securities' downgrades on sagging China demand, and as a flare-up in euro-zone debt worries hurt overall sentiment for risk assets.
Hitachi Construction was cut to "reduce" from "neutral" and slumped 6.1 percent to 1,674 yen and Kawasaki Heavy , which makes hydraulic equipment, to "neutral" from "buy", sending the stock down 5.2 percent to 290 yen.
These falls triggered heavy selling in other stocks with high exposure to China such as Komatsu Ltd which slid 6 percent to 2,379 yen and was the heaviest traded stock on the main board by turnover after Nomura cut its target price by 11 percent.
"Hedge funds are rushing to take profits on Komatsu and other construction machinery makers as their outlook on the Chinese economy and other emerging markets is getting bleaker due to continuous rate hikes," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
Fujito pointed to losses sustained on Friday on similar worries by Komatsu's biggest rival, Caterpillar Inc , which shed 0.9 percent and dragged down Wall Street's industrial sector, and a slump in the stock with the heaviest weighting in the Nikkei, robot maker Fanuc Ltd , which fell 3.8 percent to 12,330 yen.
By midafternoon, the benchmark Nikkei was down 1.6 percent at 9,457.83, having broken recent support around 9,500.
The broader Topix shed 1.2 percent to 818.14.
Traders said the Nikkei's next immediate support looms at 9,405.19, an intraday low marked on April 19.
But Fujito said this may be just the start of a bigger correction in Japanese equities, citing monetary tightening in fast-growing markets, weak signals from the U.S. economy, expiration of the Federal Reserve's $600 billion bond purchase programme next month, and domestic political hurdles in handling reconstruction after Japan's March 11 earthquake.
"I see the Nikkei sliding much lower and we may even see it dipping below the 9,000 line towards the end of June," Fujito said.
Tokyo stocks have been hemmed into a range between 9,500 and 9,800, suggesting a lack of direction and keeping the market vulnerable to events such as the downgrade of Greece by ratings agency Fitch at the weekend, which prompted investors to move to safer assets.
The euro fell broadly, hurt by ongoing worries about the potential for debt restructuring by Greece, with market positioning pointing to chances of a further drop. [ID:nL3E7GM0ED]
SOLAR STOCKS BUCK THE TREND
But solar-power equipment makers bucked the trend on a report by the Nikkei business daily that the Japanese government may this week announce a plan to make solar panels compulsory on the roofs of all new buildings by 2030.
Among solar panel stocks, Sharp Corp rose 1 percent to 733 yen, panel equipment maker Ulvac gained 2 percent to 1,932 yen, and Ishii Hyoki , a maker of silicon wafers for solar cells, surged 7.1 percent to 917 yen.
"Some of the solar stocks have not fallen since the March earthquake on hopes that renewable energy will be promoted after the country was hit the nuclear crisis," said Yumi Nishimura, a senior market analyst at Daiwa Securities."
"These stocks may continue to attract buying."
While the Nikkei has tumbled about 9 percent since the quake, Ishii Hyoki has risen about 10 percent, while Ulvac has only shed 0.5 percent.
Also helping trim losses was a rebound in utilities, which will be called on to contribute to a fund to compensate those affected by the radiation crisis at Tokyo Electric Power Co's stricken Fukushima nuclear plant, and have been further battered by concerns that power generation and distribution could be split in a rethink of the nation's energy policy.
"Utilities just got very cheap. Some of them will still be able to pay decent dividends. They may trim them a little bit, but they have just been a bit oversold, so bargain hunters and value players are targeting them right now," said Fujio Ando, senior managing director at Chibagin Asset Management.
Tohoku Electric Power gained 0.9 percent to 942 yen and Chubu Electric rose 0.8 percent to 1,232 yen.
Sony Financial Holdings , the holding company for Sony's insurance and banking operations, fell 4.4 percent to 1,364 yen after the company said it expects net profit to fall 30 percent to 29 billion yen in the year ending March 2012, due to the absence of bond trading gains booked in the previous year.
The forecast was below Thomson Reuters Starmine's SmartEstimate of 43 billion yen. (Editing by Michael Watson)