Nikkei drops as profit-taking hits exporters, utility shares

Mon Jan 7, 2013 3:06am GMT

* Nikkei down 0.2 pct, Topix flat
    * Caution against steep rise in market - analyst
    * Utilities fall on Nomura rating cuts
    * Foreigners place net buy orders for Japan stocks

    By Ayai Tomisawa
    TOKYO, Jan 7 (Reuters) - The Nikkei edged down on Monday
morning as profit-taking kicked in after a five-session winning
streak that had taken Japan's benchmark index to a 22-month
high, while utility shares led losses on brokerage rating
downgrades.
    Analysts said sentiment in the Japanese market remained
positive, underpinned by encouraging U.S. jobs data and
expectations of aggressive monetary stimulus under new Prime
Minister Shinzo Abe, which have weakened the yen and boosted
exporters' shares over the past two months. 
    But they also noted that a correction was no surprise with
technical charts signalling overbought levels.
    By the midday break, the Nikkei dropped 0.2 percent
to 10,666.20, after rising as high as 10,743.69 in early trade.
    "Investors have been carefully waiting for the timing to
take profits as they believed the market can't keep rising,"
said Yutaka Miura, a senior technical analyst at Mizuho
Securities.
    "If volume keeps up, the drop may not be sharp," he added.
    The broader Topix was flat at 888.63 in active
trade, with 1.87 billion shares changing hands. It compares with
3.53 billion shares, average trading volume in the final week of
December.
    The Nikkei has risen about 23 percent since mid-November
when Abe started calling for aggressive easing, taking the
Nikkei deeper into "overbought" territory.
    On Monday, foreign brokers placed net buy orders of 11.3
million shares, their largest net purchase since Dec. 17.
    Its 14-day relative strength index is at 81.94, far above 70
which is considered overbought and often indicates an imminent
adjustment.
    The Nikkei is trading 8.7 percent above its 25-day moving
average of 9,816.24.
    "There is strong caution against the steep rises in the
market in a short period of time," said Kenichi Hirano, a
strategist at Tachibana Securities.
    Some exporters succumbed to profit-taking, with Canon Inc
 dropping 1.2 percent and Toshiba Corp shedding
1.1 percent.
    But others were still in demand, with Honda Motor Co
 gaining 0.9 percent and Nissan Motor Co rising
1.2 percent.
    "Japanese shares will likely continue attracting buying as
the conditions are good for them," said Hiroichi Nishi, general
manager at SMBC Nikko Securities, adding that some investors
believe exporters' earnings will be better than expected.
    On Friday, the dollar climbed to a nearly 2-1/2 year peak
against the yen after senior Federal Reserve officials raised
concerns about the risks of its stimulative monetary policy.
    The dollar rose as high as 88.40 yen, according to
Reuters data, the highest since July 2010. A weaker yen lifts
exporters' overseas earnings when repatriated.
    But utility stocks tumbled, becoming the
second-worst sectoral performer after Nomura Securities cut its
ratings on some power utility companies. Kansai Electric Power
Co tumbled 3.9 percent after Nomura cut its rating to
"reduce" from "neutral", saying changes were unlikely in the
Nuclear Regulation Authority's stance against reopening nuclear
plants unless they are deemed safe.
    Kyushu Electric Power Co fell 2.7 percent after
Nomura cut its rating to "reduce" from "neutral".
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