Nikkei steady as Softbank losses offset by China data
* Softbank drops on report it will acquire Sprint Nextel * Komatsu strong as Nikkei says to meet guidance * Pessimism about earnings continues to weigh By Sophie Knight TOKYO, Oct 15 (Reuters) - Japan's Nikkei was flat early on Monday after Chinese inflation data signalled ample room for further policy easing to shore up growth, but Softbank Corp dragged as it neared a $20 billion deal to buy out a U.S. telecoms company. The benchmark headed into positive territory after China's annual rate of consumer price inflation was 1.9 percent in September, in line with market expectations, as was a year-on-year drop of 3.6 percent in producer prices, marking the seventh straight month that it has fallen. "Meeting expectations in this kind of market is actually a positive. People are just glad it's not any worse," said Yoshihiko Tabei, chief analyst at Kazaka Securities. "China-related construction machinery makers and autos are reasonably strong today on the back of the data." Data over the weekend was also positive, with China's exports growing at roughly twice the rate expected in September . Automakers Nissan Motor Co, Honda Motor Co and Toyota Motor Corp put on between 1.5 and 3.9 percent. Construction machinery maker Komatsu Ltd also propped up the index as it gained 3.6 percent and was the second-most traded stock by turnover on the main board after 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. The Nikkei added 1.56 points to 8,535.68 by the midday break, hovering near a 2-month low after dropping for a fifth straight session on Friday as investors fret over profit warnings and the earning season gets under way. Softbank shed 5.6 percent to a five-month low on Monday after a source said the Japanese mobile carrier was 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. company was worth about two-thirds more than its market capitalisation at Friday's close. "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 investors will realise (CEO) Masayoshi Son is making the right decision further down the road," he added. The telecommunications sector was the weakest sub-index, dropping 1.9 p ercent a s investors bet that rivals such as KDDI Corp, which dropped 2.5 percent, would suffer from Softbank's increased competitiveness. Sony Corp lost 1.1 percent after Moody's Investor Service cut its long-term debt rating to the second-lowest investment grade because of its poor profitability on products such as televisions and mobile phones. Precision machinery companies were generally weak, with the subindex down 0.5 percent and Shibaura Mechatronics Corp tumbling 5 percent 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 semiconductor sales. Concern about the impact of a global slowdown on corporate profits has weighed heavily on Japanese equities over the past month, while the market has also been hurt by a diplomatic spat with China that led Japanese exports to the country to fall 9.6 percent in September on a year earlier. That has left stocks looking reasonable, 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 put on 0.2 percent to 719.86 by the midday break in thin volume, at just 45.7 percent of the full-day average over the past 90 sessions.
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