Nikkei turns down as market wary ahead of Fed outcome; Sony gains

Mon Jun 17, 2013 11:00pm EDT

* Nikkei falls 0.7 pct, Topix down 0.3 pct
    * Trading remains volatile as focus turns to Fed outcome
    * Sony rises after hedge fund ups stake, presses spin-off

    By Dominic Lau
    TOKYO, June 18 (Reuters) - Japan's Nikkei average reversed
early gains on Tuesday, underscoring the volatility that has
roiled the market lately, as investors awaited the outcome of a
Federal Reserve meeting for clues on whether it will continue to
support the U.S. economy.
    By the midday break, the Nikkei slipped 0.7 percent
to 12,941.80 after trading as high as 13,139.48. It climbed 2.7
percent on Monday, lifting the index out of a bear market.    
    "There was no reason to be bullish this morning, other than
a couple of reverse trades," a Tokyo-based trader said.
    "Volatility is ongoing and we will have this kind of days
until the (upper house) election in July ... People are also
looking at the FOMC."
    Markets are looking to the Fed to clarify the outlook on 
its massive stimulus programme when the U.S. central bank
concludes its two-day policy-setting meeting on Wednesday.
    Many investors have been cutting their long Japanese
equities and short yen positions on concerns that the Fed will
scale back its stimulus this year and after the Nikkei had
rallied more than 80 percent from mid-November to its 5-1/2 year
peak hit on May 23. Since then, trading in Japanese equities has
been extremely volatile.
    Disappointment over a growth strategy unveiled by the
Japanese government recently and worries over slowing growth in
China have also contributed to the market tumult.
    Underscoring the volatility, since May 23 the Nikkei has had
15 sessions where intraday swings exceeded 2.5 percent, compared
with 16 such trading days for the year up to May 22 and four
such days in the whole of 2012. The U.S. S&P 500 only has
had one such trading day in 2013, and the Euro STOXX 50
 index has 11.    
    Sony Corp climbed 4.5 percent on Tuesday after New
York-based hedge fund company Third Point said it had raised its
stake in the Japanese firm and asked for an opportunity to
present its proposal for a partial spin-off of Sony's
entertainment unit to the board. 
    It was the most traded stock on the main board by turnover.
    The broader Topix index eased 0.3 percent to
1,081.58, with volume at 34 percent of its full daily average
for the past 90 trading days.
    "We have witnessed an improvement in fundamentals (as
confirmed during the Q1 earnings) and thus believe the recent
correction provides a good entry opportunity for the medium
term," BNP Paribas wrote in a note.
    The brokerage recommended investors sell put options on
Toyota Motor Corp, lender Sumitomo Mitsui Financial
Group, Toshiba Corp and Fujifilm Holdings Corp
 with September expiry to take advantage of high implied
volatility.
    Toyota was up 0.7 percent and the second-most traded, while 
Toshiba gained 1.3 percent and Fujifilm added 0.7 percent.
Sumitomo Mitsui Financial Group dropped 1.4 percent, a slightly
bigger drop than the 1 percent fall in the banking sector
. 
    The benchmark Nikkei has fallen 19 percent since that
mulityear high on May 23, but is still up 4.5 percent since
April 4, when the Bank of Japan unveiled sweeping stimulus
measures and has risen 24.5 percent this year.
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