Nikkei extends Thursday's 7.3 pct plunge in turbulent session

Fri May 24, 2013 1:27am EDT

* Nikkei down 1.8 pct, Topix off 1.4 pct
    * Nikkei support seen 13,800 short-term, 13,000 mid-term -
analysts
    * Futures selling drags down market - traders

    By Ayai Tomisawa
    TOKYO, May 24 (Reuters) - The Nikkei share average snapped
back into the red on Friday afternoon in a turbulent session, as
the previous day's 7.3 percent plunge forced some investors to
scale back their exposure to Japanese equities.
     Traders said that hedge funds were selling futures while
retail investors also engaged in margin selling in the afternoon
as they didn't want to hold positions before the weekend.
    The Nikkei dropped as much as 3.5 percent to 13,981.52,
after rising to 15,007.50 in morning trade which came after
Thursday's biggest one-day rout in two years.  The benchmark was
last down 1.8 percent at 14,226.41, underscoring the extreme
volatility. 
    "We are still in a market affected by the aftermath of
yesterday's jolt. It's like, when an enormous earthquake hit a
region, people are prepared for an aftershock, and that's what
we are seeing now," said Kyoya Okazawa, head of global equities
and commodity derivatives at BNP Paribas.
    Exporters took a hit, with Toyota Motor Corp 
falling 2.2 percent, while Canon Inc shed 2.1 percent
and Sony Corp dropped 2.7 percent.
    Thursday's selloff was triggered by weak manufacturing
activity data in China, Japan's second-biggest export market, as
well as worries about an earlier-than-expected roll-back of U.S.
stimulus.
    But market participants said that weak data from China was
merely a trigger for profit-taking as investors had been looking
for the right time to cut back on their holdings given the
massive surge in prices this year. They said that the Nikkei may
decline further, pegging immediate support around 13,800 and
mid-term support near 13,000.
     The Nikkei is up over 60 percent since mid-November, buoyed
by Prime Minister Shinzo Abe's prescription of aggressive
monetary and fiscal policies to revive the world's third-largest
economy.
    Despite Thursday's slide, the index is still up around 35
percent this year and up 13 percent since April 4, when the Bank
Of Japan announced that it would embark on an aggressive
monetary easing.
    "Investor sentiment is pointing south, as the Nikkei broke
above the 15,000 line on short-covering this morning," said
Mitsushige Akino, a chief fund manager at Ichiyoshi Asset
Management. "Considering how much the Nikkei has gained this
month, yesterday's decline was not enough... a correction will
likely continue."
    The broader Topix dropped 1.4 percent to 1,172.13.
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