Nikkei drops, snaps 5-day winning streak as exporters sold

Mon Jan 7, 2013 2:02am EST

* Nikkei, Topix down 0.8 pct
    * Paused yen weakness takes toll on exporters
    * Utilities fall on Nomura rating cuts
    * Aozora nosedives on Cerberus' stake sale

    By Ayai Tomisawa
    TOKYO, Jan 7 (Reuters) - Japan's benchmark Nikkei average
fell on Monday, snapping a five-session winning streak as a
pause in the yen's weakness triggered profit-taking on
exporters, while utility shares lost ground on brokerage
downgrades.
    The Nikkei dropped 0.8 percent to 10,599.01.
    The dollar last traded at 87.85 yen, inching away
from Friday's session high of 88.48 yen, the greenback's highest
level against the Japanese currency since July 2010. A stronger
yen cuts exporters' overseas earnings when repatriated.
    Analysts said sentiment in the Japanese market remained
positive, underpinned by encouraging U.S. jobs data and
expectations of aggressive monetary stimulus under new Prime
Minister Shinzo Abe, which have weakened the yen and boosted
exporters' shares over the past two months.
    But they also noted that a correction was no surprise with
technical charts signalling overbought levels.
    The Nikkei has risen about 22 percent since mid-November
when Abe started calling for aggressive easing, taking the index
deeper into "overbought" territory.
    Its 14-day relative strength index is at 78.09, far above 70
which is considered overbought and often indicates an imminent
adjustment.
    "There is strong caution against the steep rises in the
market in a short period of time," said Kenichi Hirano, a
strategist at Tachibana Securities.
    But traders said that although there may be more minor
corrections to be seen, investors' risk appetites remain strong.
    "Expectations for a weak yen will likely continue until the
Bank Of Japan's policy meeting, and there should be more room
for stocks to rise further," said Naoki Fujiwara, a fund manager
at Shinkin Asset Management.
    Fujiwara said that the yen's resistance level is seen at 90
yen to the dollar and the Nikkei's upside is expected around
11,000 until the central bank's two-day policy meeting scheduled
on Jan 21-22.
    "But in order for the market to climb higher than the
resistance level, we need more catalysts," he said.
    Exporters succumbed to profit-taking, with Toyota Motor Corp
 shedding 1.8 percent, Honda Motor Co falling
1.2 percent and Canon Inc dropping 2.6.
    Utility stocks tumbled, after Nomura Securities
cut its ratings on some power utility companies. Kansai Electric
Power Co fell 5.1 percent after Nomura cut its rating
to "reduce" from "neutral", saying changes were unlikely in the
Nuclear Regulation Authority's stance against reopening nuclear
plants unless they are deemed safe.
    Kyushu Electric Power Co fell 4.2 percent after
Nomura cut its rating to "reduce" from "neutral".
    Aozora Bank Ltd nosedived 10 percent after sources
told Reuters that U.S. buyout firm Cerberus Capital Management
LP is planning to sell most of its stake in the bank in a global
offering that could be worth more than 200 billion yen ($2.3
billion). 
    Banking shares were weaker, shrugging off news that global
regulators have given banks more time to build up cash buffers.
Mitsubishi UFJ Financial Group shed 1.7 percent and
Sumitomo Mitsui Financial Group fell 1.1 percent.
    Norihiro Fujito, a senior investment strategist at
Mitsubishi UFJ Morgan Stanley Securities, said Japanese banks
are on track to meet the requirements and were working towards
them in any case.
    The broader Topix dropped 0.8 percent to 881.06 in
active trade, with 3.53 billion shares changing hands, about the
same level with average daily trading volume in the final week
of December.
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