Nikkei sags as earnings concern persists
* Softbank drops on report it is nearing $20 billion deal * Komatsu strong as Nikkei says to meet guidance * Pessimism about earnings continues to weigh By Sophie Knight TOKYO, Oct 15 (Reuters) - Japan's Nikkei share average slipped in early trade on Monday as investors remained concerned about under-par corporate profits, and Softbank Corp dropped on news it is nearing a $20 billion deal to buy out a U.S. telecoms company. Softbank dropped 4.7 percent to a five-month low on Monday after a source said the Japanese mobile carrier is close to securing a deal to acquire control of Sprint Nextel Corp by providing $8 billion of new capital and acquiring an additional $12 billion worth of shares from Sprint shareholders. The purchase would give Softbank a 70 percent stake and imply the U.S.'s company was worth about two-thirds more than its market capitalization at Friday's close. The telecommunications sector was the weakest sub-index, dropping 1.8 percent as Softbank competitor KDDI Corp slipped 2.6 percent and Nippon Telephone and Telegraph Corp lost 1.2 percent. "It's the same reaction as when they said they were going to buy Vodafone a few years ago, everyone came out and said it was far too expensive," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities. "(However),I think that's quite impressive and I think investors will realise he's making the right decision down the road," he added. The Nikkei lost 0.3 percent to 8,512.40, striking a 2-1/2 month low after dropping for a fifth straight session on Friday and marking its biggest weekly fall since May as investors fret over profit warnings as the earning season gets underway. A few smaller companies were sold off after reporting disappointing results after the bell on Friday. Samantha Thavasa Japan Ltd sagged 6.6 percent after the high-end apparel maker sliced its six-months earning estimate for the half ended August 31 by more than half to 300 million yen ($3.8 million) and cut its full-year forecast. Shibaura Mechatronics Corp slipped 5 percent after the after the flat panel maker cut its operating profit forecast for the year ending March 31 by 75 percent to 200 million yen on falling demand and poor sales of semiconductors. Construction machinery maker Komatsu Ltd helped limit losses, however, as it gained 3.4 percent and the second-most traded stock by turnover on the main board the Nikkei business daily said its operating profit for the first half would likely meet company guidance of around 111 billion yen ($1.4 billion). That, however, still marks a drop of 17 percent on the year due to slowing demand in China. Concern about the impact of a global slowdown corporate profits has weighed heavily on Japanese equities over the past month, while the market has also been hurt by a diplomatic spat that led Japanese exports to China to fall 9.6 percent in September on a year earlier. That has left stocks looking cheap, with stocks on the first section of the Tokyo Stock Exchange trading below book value on average with a price-to-book ratio of 0.9, according to Thomson Reuters Starmine, compared to the S&P 500's price-to-book ratio of 2.2. "After a big drop last week stocks are starting to look cheap," said Masayuki Doshida, senior market analyst at Rakuten Securities. "I think we'll see a pretty steady market today as it's difficult to make big moves and people have sold off a lot in anticipation of earnings that haven't come out yet." The broader Topix index was flat at 718.11 by mid-morning.
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