Nikkei tumbles 2.3 pct, biggest 1-day drop in over a month; Italian vote gridlock

Tue Feb 26, 2013 2:35am EST

* Nikkei suffers biggest one-day percentage loss since Jan.
16
    * Uncertainty over Italian election results spook market
    * Exporters decline sharply as yen rises vs dollar

    By Tomo Uetake
    TOKYO, Feb 26 (Reuters) - Japan's Nikkei average tumbled 2.3
percent on Tuesday, its biggest one-day drop in more than a
month, as concerns grew that  inconclusive elections in Italy
could reignite the euro zone debt crisis. 
    The Nikkei dropped 263.71 points to 11,398.81,
retreating from a 53-month high hit on Monday after sources said
the Japanese government was likely to nominate Asian Development
Bank President Haruhiko Kuroda, an advocate of monetary easing,
as its next central bank chief.
    "The Italian elections and foreign exchange movements
following the outcome of the vote weighed on the market today.
Nothing else mattered," said Yasuo Sakuma, portfolio manager at
Bayview Asset Management.
    The euro fell to as low as 118.74 yen as a strong
showing in Italian elections by groups opposed to the country's
economic reforms triggered worry that Europe's debt problems
could once again destabilize the global economy. It last traded
at 120.12 yen. The dollar, which tumbled to a low of 90.85 yen,
its lowest in nearly a month, last traded at 91.99 yen.
    Italy's centre-left coalition won the lower house but fell
short of a majority in the upper house, raising concerns of a
deadlock in the government. 
    Exporters bore the brunt of the selloff. Sony Corp,
the eighth-most actively traded firm by turnover on the
mainboard, dropped 3.7 percent. Ricoh Co and Nikon Corp
 shed 3.9 percent and 3.4 percent respectively. 
    Bayview's Sakuma said the reason why exporters fell today is
not due to their European exposure but rather reflect their
recent sharp gains. "I think the market is getting acrophobic."
    He noted that some companies such as Asics Corp 
outpaced the overall market even though the firm is relatively
highly exposed to the European markets. The stock slipped 0.4
percent.
    "There was some expectations among market players that the
central bank would step into the market to buy ETFs (to support 
the markets)," an equity trader at a foreign brokerage said. 
    "But apparently it wasn't the case today and thus the index
faced additional selling pressure in the afternoon due to that
disappointment."
    When the broader Topix falls more than 1 percent in
the morning session, the BOJ typically buys exchange-traded
funds in the afternoon.
    ABE HOPES SUPPORT 
    The Topix closed 1.4 percent lower at 966.77 in active
trade, with 3.9 billion shares changing hands, compared with
last week's average daily volume of 2.93 billion shares. 
    Wacom Co Ltd, a supplier to Samsung Electronics Co
Ltd, bucked the trend and jumped 10.2 percent to a
six-year high after Nomura Securities upgraded its rating to
'buy' from 'neutral'.
    Analysts said that while the Japanese market is unlikely to
be immune from euro-zone problems in the short run, expectations
that Prime Minister Shinzo Abe will continue to pursue bold
policies to revive the economy would support long-term
investors' appetite for Japanese stocks.  
    The benchmark Nikkei has rallied over 30 percent since
mid-November, led by gains for exporters as the yen fell sharply
on Abe's aggressive fiscal expansionary and monetary easing
polices. 
    "A negative impact (from Europe's problems) to the Japanese
market is unavoidable for now, but hopes for Abenomics have not
changed," said Takuya Takahashi, a strategist at Daiwa
Securities.
    Looking ahead, investors were also awaiting testimony later
in the day from Federal Reserve Chairman Ben Bernanke for
further clues of when the U.S. central bank intends to slow down
or stop its bond-buying programme.