Nikkei drops as weak China, U.S data take toll on exporters

Mon Apr 15, 2013 2:56am EDT

* Firmer yen, weak U.S. and China data dent exporters
    * Japanese shares will likely outperform - fund
    * Sharp climbs on report of selling Pioneer stake
    * BNP Paribas, Nomura lift year-end Nikkei target

    By Ayai Tomisawa
    TOKYO, April 15 (Reuters) - Japan's Nikkei share average
dropped on Monday, moving further away from near five-year highs
tapped last week as exporters lost ground after weak economic
data from China and the United States raised concerns over the
outlook for the global economy.
    Traders said that weak overseas markets as well as
disappointing economic data crimped demand for risky assets, and
domestic-demand sensitive sectors like real estate and financial
sectors also succumbed to profit-taking.
    The Nikkei fell 1.6 percent to 13,275.66, retreating
from July 2008 levels of 13,568.25 tapped on Friday.
    The mood in the market, which was already subdued by
Friday's disappointing U.S. retail sales, deteriorated after
soft China data raised concerns about the outlook for the
world's second largest economy.
    "The Japanese market will probably keep outperforming other
markets led by domestic-demand sensitive stocks," said Masayuki
Kubota, a senior fund manager at Daiwa SB Investments.
    But he said that a short-term correction in Japanese
equities could cap gains as investors have been nervous about
the steep rise in the market.
    "Europe's debt problems are considered long-term issues,
China was thought to recover but the market was caught off guard
by the poor data, and the U.S. economy is not showing a steady
recovery."
    China's economic recovery unexpectedly stumbled in the first
three months of 2013 as the annual rate of growth eased back to
7.7 percent from the 7.9 percent set in the final quarter of
last year, official data showed. 
    China-linked shares accelerated losses after the data
published during the morning session. Construction machinery
maker Komatsu Ltd dropped 2.9 percent and industrial
robot maker Fanuc Corp shed 1.3 percent.
     The yen, which rebounded after weak U.S. retail sales, also
weighed on the exporters. The yen was last quoted at 98.03 yen
to the dollar.
    The U.S. data suggested consumer spending was considerably
weaker in the first quarter than analysts previously believed,
and many cut economic growth forecasts for the period.
 
    Among exporters, Toyota Motor Corp dropped 2.1
percent, Nissan Motor Co fell 3.9 percent and Nikon
Corp shed 2.1 percent.
    Sharp Corp bucked the overall market and jumped 11
percent after the Nikkei newspaper said on Saturday that the
struggling display maker has decided to sell its 9.2 percent
stake in car electronics maker Pioneer Corp. Pioneer
climbed 4.3 percent.
    Mitsubishi Estate Co shed 2.1 percent, while Mitsui
Fudosan Co was also hurt by a Goldman Sachs' downgrade,
falling 3.6 percent. Mitsubishi UFJ Financial Group 
fell 1.5 percent and Sumitomo Mitsui Financial Group 
was down 3.3 percent.
    The broader Topix dropped 1.3 percent to 1,133.99,
with 4.23 billion shares changing hands.
    Volume has been rising since the Bank Of Japan announced
monetary easing in early April. Last week's daily average volume
was 4.93 billion shares, compared with last month's average
daily volume of 3.24 billion shares.
    
    STILL UPBEAT
    Traders were still bullish on Japanese equities. Nomura
Securities raised its year-end forecast on the Nikkei to 16,000
from 14,500 after the Bank of Japan's massive stimulus measures
under new Governor Haruhiko Kuroda, announced on April 4, while
BNP Paribas lifted its prediction to 15,000 from 13,000.
    Analysts at BNP Paribas also said that if risk aversion to
financial markets increases, the central bank may move to the
next phase of quantitative easing by increasing ETF purchases.
    BNP recommended investors buy Nikkei call options and sell
call options on Hong Kong's Hang Seng China Enterprise Index
 or South Korea's KOSPI among the strategies,
saying it expected relatively less upside for the Chinese and
Korean markets because of tight liquidity conditions.
    The benchmark Nikkei has rallied more than 7 percent since
the announcement from the BOJ, which promised to inject $1.4
trillion in the world's third-largest economy in less than two
years. The index has risen more than 50 percent since Japanese
prime minister Shinzo Abe called for aggressive monetary and
fiscal expansionary policies last November.
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