Nikkei slumps to over 2-month low on worries about Fed, rising yen

Wed Jun 12, 2013 11:11pm EDT

* Nikkei drops 5.3 pct, Topix off 4.1 pct
    * Nikkei dips below pre-BOJ easing levels
    * Incentive to buy Japan shares seen erased by strong yen
    * Futures selling drags on cash market ahead of settlement

    By Ayai Tomisawa
    TOKYO, June 13 (Reuters) - Japan's Nikkei share average
dived back into bear market territory on Thursday, dipping to
levels seen before the central bank's sweeping monetary policy
stimulus in early April, as the yen rebounded, sending shares of
exporters tumbling.
    Traders said the drop in both the Nikkei and the broader
Topix to below their 100-day moving averages triggered stop
losses, prompting more selling in index futures ahead of the
settlement of June futures and options on Friday.
    At the midday-break, the Nikkei was down 5.3 percent
at 12,587.40 points after falling as low as 12,415.85, a level
last seen before the Bank Of Japan announced aggressive easing
on April 4.
    The Topix dropped 4.1 percent to 1,051.67.
    The Nikkei entered bear market territory for the second time
in less than a week, having plunged more than 20 percent from a
5-1/2-year high hit on May 23. It had staged a short-lived
rebound on Monday.
    Analysts said sentiment was hurt by the yen's strengthening
above 95 to the dollar, the upper limit of the 90-95 yen range
at which many exporters have based their assumptions for their
earnings this fiscal year.
    A stronger yen erodes exporters' overseas earnings when
repatriated and hurts their competitiveness by making their
products more expensive.
    "Whether the yen's strength will persist or not is a key. If
it does, companies' earnings will be trimmed, and investors are
extremely concerned that the incentive to chase the Japanese
market higher will be erased," said Hiroyuki Fukunaga, the chief
executive of Investrust.    
    On Thursday, the dollar fell to 94.85 yen, its lowest level
since April 4.
    "Investors are becoming risk averse on global assets," said
Yasuo Sakuma, portfolio manager at Bayview Asset Management,
adding that sentiment may remain weak as long as there are
concerns about the Fed scaling back its stimulus measures.
    After the BOJ bought 19.8 billion yen ($207 million) in
exchange traded funds and 100 million yen worth of J-REITs on
Wednesday to support the market, some market participants noted
that there is some sense of security that if the market drops
sharply, the Bank of Japan will step in to support the market.
    But Sakuma argued that such efforts by the central bank may
not have a long-lasting supportive impact.
    "No matter what right thing the BOJ does, the positive
impact won't last. Fundamental concerns are coming from overseas
... If the Fed decides to trim stimulus and once announced, the
market will probably fall, then hit the bottom, and will rise
again. Until then, sentiment will stay fragile," Sakuma said.
    Exporters lost ground, with Toyota Motor Corp 
dropping 4.1 percent, Panasonic Corp falling 3.6
percent and Komatsu Ltd shedding 3.5 percent.
    Softbank Corp nosedived 8.0 percent after Clearwire
Corp's board urged shareholders to accept a tender
offer from Dish Network Corp over an earlier deal with
majority owner Sprint Nextel Corp to buy out the minority
shareholders of the wireless service provider. 
    Softbank on Tuesday said it agreed to raise its offer Sprint
Nextel to $21.6 billion from $20.1 billion as it fights off a
counter bid by Dish Network.
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