Nikkei sheds 1.7 pct on U.S. growth fears as markets wait on BOJ outcome

Wed Apr 3, 2013 9:27pm EDT

* BOJ expects to unveil bold monetary easing steps
    * Weak U.S. data prompts investors to take profit
    * Fast Retailing falls, giving up Wednesday's near 14 pct
jump

    By Dominic Lau
    TOKYO, April 4 (Reuters) - Japan's Nikkei average dropped
1.7 percent on Thursday, with sentiment affected by concerns
over the U.S. recovery after weaker-than-expected data as
markets waited on the outcome of a crucial Bank of Japan policy
meeting. 
    The Nikkei shed 208.17 points to 12,154.03, after
rebounding 3 percent on Wednesday from steep losses earlier in
the week. Thursday's drop took the index back below its 25-day
moving average of 12,203.93.
    The main focus for the local market was on the outcome of
the BOJ's two-day meeting, the first under its new leadership. 
    The central bank is expected to embark on a bold experiment
by pulling out all the stops to beat deflation, starting with
ramping up its bond buying and extending the maturities of that
debt. 
    "This time is QE1, just focusing on the JGB market," he
said," said Shun Maruyama, chief Japan equity strategist at BNP
Paribas.
    Murayama said the BOJ would likely disappoint the market as
it was unlikely to raise the size of its purchase of risky
assets, such as exchange-traded funds and real estate investment
trust, at this meeting.
    "I believe the Nikkei will correct to 11,000, so another 10
percent decline is highly likely," he said.
    Data from the United Stated provided an early bearish lead
for the Nikkei, with exporters coming under pressure.
    Toyota Motor Corp, Honda Motor Co, Canon
Inc and construction machinery maker Komatsu Ltd
 were down between 1.8 and 3.8 percent.
    U.S. private employers added 158,000 jobs last month, its
weakest pace in five months, while growth in the vast service
sector slowed, raising concerns that the economic recovery could
be hitting a soft patch. 
    Losses in index heavyweight Fast Retailing also
weighed on the market. The operator of Uniqlo casual fashion
chain sank 3.2 percent, giving up some of the previous session's
near 14 percent jump after Uniqlo posted a 23.1 percent surge in
Japan same-store sales in March.
    Investors took profit on real estate and financial shares,
which have been rallying in the past few months on expectations
that they will benefit from the reflationary drive.
    The real estate sector eased 1.4 percent but is
still up 65 percent since mid-November, outpacing a 40 percent
rise in the benchmark Nikkei during the same period, when Prime
Minister Shinzo Abe unveiled proposals during his election bid
for bold fiscal expansionary and monetary easing policies.
    In terms of valuations, real estate companies are getting
expensive, with their 12-month forward price-to-book ratio
climbing to 2.2. That compares with Japanese equities' 1.15 and
the real estate sector's 10-year average of 1.83, according to
Thomson Reuters Datastream. 
    Lenders Mitsubishi UFJ Financial Group, Sumitomo
Mitsui Financial Group and Mizuho Financial Group
 also lost ground, down between 0.8 and 2 percent. 
    Banks, on the other hand, offer a much cheaper valuation.
They carry a 12-month forward P/B of 0.8, even though their
share prices have risen 51 percent since mid-November. 
    The broader Topix index lost 1.3 percent to 996.82
on Thursday morning.
    Mitsubishi Heavy Industries Ltd, however, advanced
2.7 percent after the Nikkei newspaper said the Japanese firm
and France's Areva SA have won an order to build
Turkey's second nuclear power plant -- a project that is
expected to cost some $22 billion.
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