Nikkei falls after piercing 11,000, earnings in spotlight

Mon Jan 28, 2013 7:18am GMT

* Sony jumps on Citigroup upgrade
    * Fanuc tumbles on poor results
    * Advantest sags on report of disappointing earnings

    By Ayai Tomisawa
    TOKYO, Jan 28 (Reuters) - Japan's Nikkei share average
dropped on Monday as investors took  profit on exporters as they
awaited further cues from corporate earnings after the index
briefly pierced a fresh 32-month high above 11,000 in early
trade.    
    The Nikkei fell 0.9 percent to 10,824.31 after
initially leaping to 11,002.86 as interest in Japanese exporters
was fanned as the yen dropped to 91 versus the dollar, promising
higher overseas revenues once they are repatriated.
    The Nikkei has gained about 25 percent since mid-November on
hopes that Japan's new prime minister, Shinzo Abe, will 
pursue aggressive policies to beat the country's prolonged 
deflation, including pressuring the central bank for further 
monetary easing.
    Analysts said sharp rallies in the Japanese market are
merely backed by expectations, and companies have yet to prove
that their fundamentals have recovered, thus the market is prone
to a correction.
    "We haven't seen the numbers yet. The market is seen having
reached its upside as it is running ahead of the
reality...investors at domestic institutions remain cool about
companies' fundamentals," said Yutaka Yoshino, chief technical
analyst at SMBC Nikko Securities.
    But Yoshino said that the Japanese market is expected to
rise further in the long term if the current weak yen trend
continues.
    "The recent rally is just the start of a long-term rise. The
market has yet to recover from its pre-Lehman levels (of above
12,000)," Yoshino said.
    Despite the recent rallies, the Nikkei remains well below
the 2008 financial crisis while the Standard & Poor's 500 Index
 and Germany's benchmark stock index have both already
exceeded that level.
 
 

    Yoshino added that the Nikkei was expected to breach the
12,000-level around April-June as the effects of a weaker yen
would start filtering through to corporate bottom lines then.
    Reflecting this prospect, Sony Corp outperformed
most exporters, jumping 9.1 percent after Citigroup raised its
rating to "buy" from "neutral", saying the softer yen has
enabled Sony to take more risks on operations such as the home
appliance business.
    Exporters lost ground on profit-taking as the yen's weakness
against the dollar paused after trading below 91 yen to the
dollar.
    Toyota Motor Corp dropped 0.6 percent, Nikon Corp
 shed 0.9 percent and Toshiba Corp fell 1.3
percent.
    With Japan's earnings season getting into full swing this
week, investors are hoping that the yen's more than 10 percent
fall against the dollar in the past two months will improve
Japanese companies' forecasts in the year to come.
    But the yen effect may not be enough to offset slowing
demand in China, exacerbated by a diplomatic spat that chilled
interest in Japanese products, as well as an ongoing EU debt
crisis that has severely crimped consumption in the region.
    Industrial robots maker Fanuc Ltd, which tumbled
7.0 percent, cited both of those reasons when it cut its
operating forecast for the year ending March by almost 20
percent to 178 billion yen ($2 billion) after the bell on
Friday. 
    Fanuc also said its operating profit for the nine months
ended December had dropped 13.4 percent from the previous year,
hurt by a yen that remained strong for much of that year. 
    "We've got big tests in the coming week, like Fanuc coming
out with weak numbers, and I don't think the judgment is over on
that yet. Four percent down is not a shock," said Stefan
Worrall, director of equity cash sales at Credit Suisse.
   "It does matter if euphoria has got ahead of itself. A lot of
these stocks have already ripped on a pretty bullish macro
outlook," Worrall added.
    Advantest Corp shed 5.3 percent after the Nikkei
business daily said the chipmaker's operating profit for the
year ending March was expected to undershoot expectations as it
likely suffered an operating loss of 2 billion yen ($22 million)
in the last quarter due to slowing iPhone 5 sales.
    GS Yuasa, who makes batteries for Boeing Co's
 Dreamliner, jumped 4.8 percent, marking its biggest
one-day percentage gain in eight months, as Japanese
investigators said there was no indication that the damaged
battery on the 787 passenger jet that made an emergency landing
on Jan. 16 was the issue.
    The stock is still down 5.7 percent since the battery of
another Dreamliner caught fire at the Boston airport on Jan. 7.
U.S. investigators have still not determined the cause of the
battery fire and said 'no obvious anomalies were found" in its
initial investigation of an undamaged battery aboard the plane.
    The broader Topix shed 0.4 percent to 913.78 in
relatively thin trade, with 3.07 billion shares changing hands,
compared to last week's average daily volume of 3.44 billion
shares.