Nikkei dips on earnings fears as slowdown fears persist

Mon Oct 8, 2012 11:38pm EDT

* Softbank falls, beaten by KDDI on sales of iPhone 5
    * Sharp takes a tumble after Goldman Sachs downgrade
    * Pharmaceuticals, real estate in demand

    By Sophie Knight
    TOKYO, Oct 9 (Reuters) - Japan's Nikkei share average
dropped on Tuesday morning amid  growing concern that companies
will slash full year forecasts when they release quarterly
earnings, after the World Bank warned China's slowdown may be
more protracted than thought.
    Mobile operator Softbank Corp weighed on the
market, sagging 2.8 percent after the Nikkei business daily said
KDDI Corp garnered more subscribers for the iPhone 5,
partly because it allowed users to keep their phone numbers when
switching carriers. KDDI gained 0.3 percent.
    Rumours of a strike halting production of the smartphone at
one of Apple Inc 's Chinese factories, though denied by
the company, also weighed on major suppliers such as Murata
Manufacturing Co Ltd, which lost 2.8 percent.
     eAccess Ltd, a mobile provider that Softbank has
said it will acquire in a share swap worth more than $1.8
billion, gained 3.3 percent and was the second-most-traded stock
on the main board by turnover. It reached 48,600 yen, edging
closer to  the 52,000 yen per share Softbank offer. 
    Also in favour were stocks of firms that make or deal in 
"induced pluripotent cells" or "iPS cells", after the two 
scientists who discovered them won a Nobel Prize. 
    Takara Bio Inc, which makes the cells, was untraded
with a glut of buy orders, while Shimadzu Corp, which
develops equipment to culture the cells, advanced 1.2 percent. 
    Those gains helped the pharmaceutical sector move
up 1.2 percent, softening the Nikkei's fall.
    The benchmark edged down 0.4 percent to 8,831.31 by the
midday break, with its drop also clipped by a rise of 2 percent
for the real estate sector.
    "Recently land and rent prices have been strong, so real
estate is lending support to the index," said Norihiro Fujito,
general manager of investment at Mitsubishi UFJ Morgan Stanley.
    "But there is a big downside for the market in the shape of
China, which is pulling the Japanese market away from its
correlation with the U.S. market."
    Japanese companies have been issuing profit warnings as
their sales take a hit from a double whammy of dwindling demand
across China and a boycott of Japanese goods there because of a
territorial dispute. 
    The World Bank warned that China's slowdown could yet worsen
and cut its growth forecast to 7.7 percent from a May forecast
of 8.2 percent. 
        Another factor behind profit warnings is the resilience
of the Japanese currency, which may cause exporters to cut
forecasts during the imminent earnings season, as many factored
in an exchange rate of about 80 yen to the dollar during the
last earnings season. The yen hovered at 78.29 on Tuesday
morning. 
    "There will be more companies cutting their forecasts,
particularly with the yen where it is," said Fumiyuki Nakanishi,
general manager of investment and research at at SMBC Friend
Securities.
    Mizuho Financial Group dropped 2.3 percent after
the company said late on Friday that it would post a 173.7
billion yen ($2.2 billion) appraisal loss on its equity
portfolio for the July-September quarter.
    Elsewhere, Sharp Corp sank 8.5 percent after
Goldman Sachs cut the troubled consumer electronics company's
rating to "Sell" from "Neutral" and slashed its target price to
120 yen from 175 yen.
    The broader Topix lost 0.4 percent to 733.97 by the
midday break. 
    The Japanese market was closed on Monday for a national
holiday.
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