Nikkei sags as China slowdown stokes concern over earnings

A visitor looks at market indices displayed at the Tokyo Stock Exchange in Tokyo September 26, 2012.

TOKYO (Reuters) - Japan's Nikkei share average fell the most in eight sessions on Tuesday on concern that companies will slash profit forecasts further following a World Bank warning that the slowdown in key trading partner China may be more protracted than thought.

Mobile operator Softbank Corp (9984.T) was in focus after the Nikkei business daily said rival KDDI Corp (9433.T) had beaten its subscriber figures for the iPhone 5. The stock slid 1.2 percent and was the most traded on the main board by turnover.

Automakers were weak with Suzuki Motor Corp (7269.T) losing 2.1 percent after the company said its Chinese sales sank 42.5 percent in September from a year earlier after a territorial dispute triggered boycotts of Japanese goods.

"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," said Norihiro Fujito, general manager of investment at Mitsubishi UFJ Morgan Stanley.

Japanese companies have been issuing profit warnings as their sales take a hit from the boycott and closure of stores and factories, as well as a double whammy of dwindling demand across China. The World Bank cut its growth forecast for China to 7.7 percent from a May forecast of 8.2 percent on Monday. ID:nL3E8L82LA]

The Nikkei dropped 1.1 percent, its biggest fall in eight sessions, following a local holiday on Monday and after Chinese markets took a break for holidays last week.

"The market is unusually weak today. It feels like some foreign money is being shifted out of Japan after it was used as a proxy while China was on holiday last week," said Stefan Worrall, director of cash sales at Credit Suisse in Tokyo.

"That would explain why real estate is up, which this year seems to be on a stealth rally irrespective of the fact that foreigners don't really get involved in the sector," he added.

Selling led by foreign investors tends to leave the real estate sector relatively unaffected. The real estate sub-index .IRLYT.T has added 38.3 percent so far this year and came close to its year-to-date March 15 high of 875.98 on Tuesday.

The broader Topix .TOPX lost 1.3 percent to 727.68 in moderate trade, at 101.7 percent of its average over the past 90 days.

The pharmaceutical sector .IPHAM.T also outperformed the market, stepping up 0.4 percent, thanks to stocks of firms making products related to "induced pluripotent cells" or "iPS cells", after the two scientists who discovered them, including one Japanese man, won a Nobel Prize.

Takara Bio Inc (4974.T), which makes the cells, was untraded with a glut of buy orders through the day's session before logging a 19.2 percent rise after close, while Shimadzu Corp (7701.T), which develops equipment to culture the cells, advanced 1.2 percent.

SHARP SLIDES

Sharp Corp (6753.T) took a hammering, losing 14.7 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.

Sharp's stock has fallen 77.6 percent so far this year, causing shareholder Pioneer Corp (6773.T) to book a likely net loss of 4.8 billion yen ($61 million) in the six months ending September 30, down from a previous forecast of 1 billion yen profit[ID:nXB0T7HSBF].

Pioneer fell 5.9 percent on Tuesday after the car electronics company said on Friday that that it would likely book a net loss of 4.8 billion yen ($61 million) in the six months ending September 30, down from a previous forecast of 1 billion yen profit, due to a fall in the value of Sharp Corp shares that it owns.

Elsewhere, rumors of a strike halting production of the iPhone at one of Apple Inc (AAPL.O)'s Chinese factories, though denied by the company, also weighed on major suppliers such as Murata Manufacturing Co Ltd (6981.T), which lost 3.9 percent.

($1 = 78.1600 Japanese yen)

(Editing by Sanjeev Miglani)