Nikkei sheds 2.1 pct, retreating from 4-1/2 yr high on Cyprus concerns

Sun Mar 17, 2013 11:12pm EDT

* Unusual Cyprus bailout plan rattles investors
    * Exporters lead losses
    * Panasonic rises; considering exit from some businesses

    By Tomo Uetake
    TOKYO, March 18 (Reuters) - Japan's Nikkei share average
dropped 2.1 percent on Monday morning, pulling back from a
54-month high on uncertainty over an unusual bailout proposal
for Cyprus that threatens to reignite the euro zone debt crisis.
    Shares of economy-sensitive firms, which have rallied
sharply in the past few months on Prime Minister Shinzo Abe's
aggressive policies aimed at energising the economy, took a
battering. 
    The Nikkei lost 263.88 points to 12,297.07, breaking
below its five-day moving average of 12,358.74 and heading for
its biggest one-day percentage fall in three weeks.
    "We have the initial sell-off because people are worried
about Europe," a senior dealer at a foreign brokerage said. 
    "What happened in Cyprus is unprecedented ... we are looking
at a capital flight as a very real situation." 
     In a radical departure from previous rescue packages, euro
zone finance ministers want to tap Cyprus' savers in order for
the country to receive a 10 billion euro ($13 billion) bailout,
triggering a run on cash after its announcement on Saturday
morning. Cyprus was working on a last-minute proposal to soften
the blow after a parliamentary vote on the measure was postponed
until Monday, a government source said. 
    Exporters came under pressure as the Cyprus news saw nervous
investors seeking shelter in the safe-haven yen.
    Toyota Motor Corp, Honda Motor Co, Sony
Corp and Canon Inc lost between 2.5 and 2.9
percent.
    The yen rebounded against the dollar to 94.80 yen,
from 95.38 yen late on Friday. It rose as much as 93.45 yen, its
highest level since March 6, moving away from a 3-1/2-year low
of 96.71 struck on March 12. 
    "News from Europe is surely weighing on the market's risk
sentiment today, but I expect this is going to be rather a
one-day correction," said Shun Maruyama, chief Japan equity
strategist at BNP Paribas. 
    "As long as the U.S. dollar/yen exchange rate is steady, I
think there will be dip buying in the Japanese stock market.
Unless today's Wall Street falls significantly, Tokyo stocks are
likely to rebound tomorrow."
    The Japanese currency has fallen 17 percent against the
dollar since mid-November after Abe called for bold fiscal
expansionary and monetary easing policies to whip deflation in
his election campaign. During the same time, the benchmark
Nikkei has rallied 42 percent.
    Banks, which have also benefited from Abe's
reflationary policy, fell on Monday morning, with Sumitomo
Mitsui Financial Group down 2.2 percent and Mitsubishi
UFJ Financial Group off 2.3 percent.
    The sector is still up 58 percent since mid-November,
outpacing the Nikkei. Despite its sharp gain, the sector still
offers cheaper valuation than the broader Topix index,
with a 12-month forward price-to-earnings ratio of 11.1 versus
the Topix's 13.5, according to Thomson Reuters Datastream.
    The Topix dropped 1.7 percent to 1,033.71 by the midday
break on Monday.    
    Panasonic Corp bucked the broad market and gained
2.9 percent after sources said the troubled consumer electronics
maker was considering selling its healthcare business to raise
cash.
    The Nikkei newspaper also said Panasonic was leaning toward
withdrawing from plasma television operations as part of a
downsizing of its TV business.
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