Nikkei edges lower; bond yield climbs prompt profit-taking

Tue May 14, 2013 4:03am EDT

* Profit-taking on interest rate-sensitive sectors weighs
    * Utility stocks buck weakness on Nomura's rating hikes
    * Nomura expects 26.2 pct rise in large cap operating
profits

    By Tomo Uetake
    TOKYO, May 14 (Reuters) - The Nikkei share average slipped
for the first time in three days on Tuesday, moving away from
5-1/2 year highs as climbs in bond yields prompted profit-taking
in reflationary plays such as real-estate and financial stocks.
    The Nikkei, already on a bull run on the back of Japan's new
monetary stimulus policies, has gained a further 4 percent since
the dollar broke above 100 yen last Thursday and is now trading
7.6 percent above its 25-day moving average.
    The benchmark has climbed 70 percent since mid-November when
Japan's current prime minister, Shinzo Abe, began calling for
bold monetary easing as part of his election campaign.
    "It is quite natural for the market to hit such a speed bump
after recent sharp gains," said Tomoichiro Kubota, a senior
market analyst at Matsui Securities.
    "Nevertheless, the underlying tone is still positive. I
still think the Nikkei could test the 15,000 level as early as
this week, depending on moves in the JGB market," he said.
    The Nikkei shed 0.2 percent to 14,758.42, after
marking a 5-1/2 year high of 14,849 on Monday.
    Japanese government bond prices sold off for a third
straight session on Tuesday and the benchmark yield hit a
nine-month high, with the 10-year cash bond yield 
adding 7 basis points to 0.8450 percent.
    The broader Topix gained 0.2 percent to 1,235.08.
Trade was moderate, with 4.43 billion shares changing hands,
close to last month's daily average volume of 4.31 billion
shares.
    Mitsubishi Estate slid 5.6 percent as reflationary
plays lost some of their lustre. Among financials, Nomura
Holdings fell 1.3 percent, becoming the second-most
traded stock on the main board.
    But there were notable gainers.
    Kansai Electric Power Co and Kyushu Electric Power
Co gained 13 percent and 6.3 percent respectively,
after Nomura Securities hiked their ratings, citing the high
likelihood of the two resuming nuclear power generation in the
medium term.
    Struggling audio equipment maker Pioneer Corp 
jumped 26 percent and was the third-biggest percentage gainer on
the main board after saying it would form a capital alliance
with NTT DoCoMo Inc and increase ties with Mitsubishi
Electric Corp to improve its financial base.
    The weakening in yen has improved the profit outlook for
many Japanese firms, as many exporters have used assumptions of
around 90-95 yen to the dollar for the year ending March 2014 -
outlooks which now look very conservative as the dollar is
trading around 101 yen.
    "The market expects upward earnings revisions in the fall,
when prospects for the fiscal year end will be clearer. Then,
the Nikkei will have 16,200-17,300 in sight," said Nobuhiko
Kuramochi, a strategist at Mizuho Securities.
    Nomura Securities said it expects an average 26.2 percent
rise in operating profit in the current business year for 188 of
330 Russell Nomura large-cap stocks excluding financials.
    At the moment, forecasts from the 188 companies call for an
average 19.6 percent rise in annual operating profit.
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