July 6, 2017 / 2:51 AM / 3 years ago

Nikkei falls on Korean tensions; construction stocks rise on disaster repair demand

* Construction companies soar on post-disaster demand hope

* Banking sector falls on profit-taking

By Ayai Tomisawa

TOKYO, July 6 (Reuters) - Japanese stocks edged down on Thursday morning as ongoing tensions around North Korea continued to sap risk appetite, while the retail sector underperformed on dismal earnings from convenience stores.

For the overall market, shares were on the defensive on continued tensions in the Korean peninsula after North Korea fired a missile into Japanese waters on Tuesday.

Investors are also focused on major events this week such as U.S. jobs data and the Group of 20 nations’ meeting in Germany, where U.S. President Donald Trump and other leaders are expected to discuss steps to rein in North Korea’s weapons programme.

The Nikkei dropped 0.3 percent to 20,018.87 in midmorning trade, and the broader Topix shed 0.1 percent to 1,616.43.

“Investors took profits on stocks such as financials, which gained recently on rising U.S. yields,” said Nobuhiko Kuramochi, a strategist at Mizuho Securities. “They are risk averse now, and they want to secure profits before they see the outcome of G20 meeting.”

Kuramochi also said demand for overbought Japanese financial companies, which invest in high-yielding products such as foreign bonds, will be determined by whether benchmark U.S. 10-year yields rise to 2.4 or 2.5 percent in the coming weeks. They are currently trading above 2.3 percent.

The banking sector fell 0.5 percent, with Mitsubishi UFJ Financial Group dropping 0.7 percent and Sumitomo Mitsui Financial Group declining 1.0 percent.

The retail sector also lost ground, falling 0.6 percent.

Convenience-store operator Lawson Inc shed 3.6 percent after its operating profit dropped 6.9 percent on the year to 16.25 billion yen for the first quarter ended May. Ministop Co stumbled 3.5 percent after it posted an operating loss of 269 million yen for the first quarter ended May.

Meanwhile, retail investors sought investment opportunities in shares in construction companies in the Kyushu region on post-disaster damage repair demand after the region was hit by heavy rain overnight.

Parts of Fukuoka prefecture on the southwestern island of Kyushu were hit by 774 mm (30.5 inches) of rain in nine hours on Wednesday, about 2.2 times the amount of rain that falls in a normal July, NHK national television said.

Evacuation centres were set up at schools and government buildings on high ground amid reports of landslides and flooded roads.

Engineering services provider Kyudenko Corp surged 4.5 percent, civil-engineering firm Wakachiku Construction Co jumped 10 percent, while Aso Foam Crete Co, which provides pine line filling, also soared 10 percent. (Editing by Sam Holmes)

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