Nikkei hurt by weak banks, disappointing Gree results

Wed Aug 15, 2012 3:03am EDT

* Gree droops after earnings miss expectations
    * Sharp continues to tumble, Goldman Sachs sees more
downside risk
    * Japan replaces euro zone as most underweight region for
funds-poll
    * Topix's 12-mth forward P/B falls to 4-year low-Datastream

    By Sophie Knight
    TOKYO, Aug 15 (Reuters) - Japan's Nikkei share average edged
lower on Wednesday as bank and steel shares slid, offsetting
gains in exporters from a weaker yen following encouraging
economic data from the United States and Germany.
    The Nikkei pared losses at the last minute to end
down just 0.1 percent at 8,925.04 after facing resistance at its
200-day moving average of 8,959.67. 
    Banks and iron and steel companies -- recent
recent strong performers -- came under heavy selling pressure
amid low liquidity, with many investors away for Japan's "Obon"
summer holidays. 
    "Although the market is quiet we're still seeing some sharp
moves as shares reverse with people selling off stocks that have
risen recently, or else hunting for battered bargains," said
Kenichi Hirano, operating officer at Tachibana Securities. 
    The Topix's iron and steel subindex sagged 2.6
percent, dropping to the 38.2 percent retracement of an 11
percent rebound since July 25, when it hit a 9-year intraday
low. After rebounding 16.8 percent in the same period, Nippon
Steel fell 2.4 percent after BNP Paribas cut its
earnings forecast.
    BNP Paribas also dropped its price target for Kobe Steel Ltd
 to 75 yen from 100, contributing to the stock's 5.7
percent fall.
    Gree Inc sagged 7.3 percent after the social gaming
company's full-year operating profit and earnings guidance for
the business year ending June 2013 undershot market
expectations. 
    The selloff came after a 14 percent rally over the previous
three sessions as investors had expected strong results from
Gree after rival DeNA Co Ltd beat market forecasts with
its quarterly earnings last Thursday. DeNA dropped 1.8 percent
as the fourth-most traded stock, while Gree was the second
most-traded, behind Sumitomo Mitsui Financial Group.
    Sumitomo Mitsui was one of the megabanks sold off, along
with peers Mitsubishi UFJ Financial Group and Mizuho
Financial Group, which lost between 0.6 and 2.2
percent.
    "The banking index couldn't break the 110-mark again. It's
rangebound trade, so everyone just goes short on the megas in a
week where there is no liquidity," a senior dealer at a European
brokerage said.    
    Some exporters enjoyed a bounce from an easing yen,
including industrial robot maker Fanuc Corp, Canon Inc
 and construction machinery maker Komatsu Ltd,
up between 0.7 and 1.8 percent.
    "Although reversal is the prevailing tendency in today's
market, it doesn't go for everything - just look at Sharp,"
Hirano of Tachibana Securities said.  
    Struggling consumer electronics maker Sharp Corp 
sank 12.4 percent to 169 yen, its lowest level since December
1975 after Goldman Sachs warned of further downside risk and cut
its price target, while Deutsche Bank downgraded its rating to
'sell' from 'hold'. 
    
    UNDERPERFORMANCE 
    Japanese corporate earnings have been weak so far this
quarterly reporting season, with 53 percent of the 154 Nikkei
companies missing market expectations, data from Thomson Reuters
StarMine showed. That compared with misses of 40 percent in the
previously quarter's earnings season.
    The benchmark Nikkei is up 5.6 percent so far this year,
underperforming a 10.6 percent rise in the pan-European STOXX
Europe 600 index even though the region is grappling
with a sovereign debt crisis.     
    
    Japan has replaced the euro zone as the largest region in
which fund managers are underweight equities in the latest
monthly asset manager survey by Bank of America Merrill Lynch.
    Nevertheless, valuations on Japanese equities remained cheap
compared with other developed markets. The Topix carried
a 12-month price-to-book ratio of 0.8, its lowest in four years
and below STOXX Europe 600's 0.85 and S&P 500's 1.9, according
to data from Thomson Reuters Datastream.
    The Topix eased 0.3 percent to 747.32 on Wednesday. Trading
volume was relatively light, at 89.3 percent of i ts 90-day
average.