Nikkei slumps to four-week low as China concerns persist

* China manufacturing sector to stay soft
* Sharp sags after S&P downgrades to 'junk'
* Nomura rises on cost cuts
* Astellas Pharma up on FDA drug approval

By Sophie Knight
TOKYO, Sept 3 (Reuters) - Japan's Nikkei share average
closed at a four-week low on Monday after seesawing throughout
the day as disappointing Chinese data outweighed hopes the U.S.
Federal Reserve would act to boost the economy.
The benchmark index picked up briefly in the afternoon,
supported by gains for other Asian stock markets on speculation
that the weak Chinese data would prompt Beijing to ease policy
further.
However, the Nikkei failed to hold onto those gains,
slipping 0.6 percent to 8,783.89 points, its third straight
session of losses.
The Nikkei China 50 index lost 0.7 percent after
China's official factory purchasing managers' index fell to a
lower-than-expected 49.2 in August, marking the first time since
November 2011 that the number has fallen below 50, which
demarcates expansion from contraction.
"There might be some kind of meek policy change in China
before the end of the year, but because of the leadership
handover we're unlikely to see a meaningful movement, never mind
a pick in the economy, before next year," said Norihiro Fujito,
senior investment strategist at Mitsubishi UFJ Morgan Stanley.
Concerns over China's growth continued to hurt raw material
prices and resources-related shares, dragging the mining sector
down 2.4 p e rcent while shippers fell 2.1
percent.
The Nikkei has now nearly erased all of its gains in August,
hovering only 1 percent higher than its July 31 close of
8,695.06.
"Chinese data is likely to stay bad for a while, and
domestically the main buying going on is commodity trading
advisors (CTAs) pushing longs or individuals covering their
shorts, so the upside is very heavy," Fujito said.
"CTAs also tend to unwind before big macro events, which
happened last Thursday before Bernanke's statement, causing the
Nikkei to fall through the 9,000 level."
Although U.S. Federal Reserve Chairman Bernanke stopped
short of providing a clear signal on further monetary policy
easing on Friday, his comments were enough to bolster bets that
the Fed was closer to offering more stimulus, providing some
support to the market.
Yet market players are now doubtful the Nikkei will see the
9,000 level again in September, which tends to be the weakest
month for the benchmark index, with an average monthly drop of
1.2 percent between 1971 and 2011.
The broader Topix index eased 0.4 percent to 728.63
on Monday.
"You definitely have got to be concentrating on the domestic
market at the moment. Within that you want to be taking a look
in some of the banks, some real estate, some retail names," said
Nicholas Smith, Japan strategist at CLSA.
"Auto is still probably the biggest conviction of the year
... fantastic valuations, demand has been strong. Last year was
annus horribilis (after the massive earthquake disruption to the
supply chain), this year is getting back on track."
Despite a brief fillip in the afternoon after data showed
Japan non-mini auto sales rose 7.3 percent in August from a year
earlier, automakers were dragged down with the broader market by
Monday's close.
Toyota Motor Corp, which saw a massive 17.8 percent
year-on-year increase in non-mini auto sales in August, erased
gains to end 0.2 percent down. Honda Motor Co dropped
0.8 percent, while Nissan Motor Co lost 0.1 percent.

SHARP SHARES BATTERED
Embattled TV maker Sharp Corp sagged 6.1 percent
and was the most traded stock on the main board by turnover
after credit rating agency Standard & Poor's cut its debt rating
to 'junk' status after the market close on Friday and kept the
firm on negative watch for a possible further downgrade.
Swimming against the tide, Nomura Holdings advanced
2.3 p ercent a fter Japan's top investment bank said it is cutting
an additional $1 billion in costs in the second major
restructuring of its loss-making overseas operations in less
than a year.
"I'd go for domestic retailers right now, particularly
department stores, as well as Japanese companies that are
deepening their networks in Asia right now," said Fujio Ando,
managing director at Chibagin Asset Management.
Ryohin Keikaku, the operator of the Muji general
household and clothing store, rose 1.6 percent after Deutsche
Securities hiked its target price and earnings forecast for the
current financial year on the back of strong domestic sales.
Other gainers included Astellas Pharma Inc, which
rose 2.6 percent after the U.S. Food and Drug Administration
approved its novel prostate cancer drug developed jointly with
Medivation Inc and Astellas.