Nikkei falls as weak China data, prospect of less Fed stimulus chill sentiment

Wed Jun 19, 2013 11:14pm EDT

* Nikkei down 1.1 pct, Topix off 0.9 pct as Fed comments
hurt sentiment
    * China's weak factory data drags down China-related
manufacturers
    * Real estate shares battered
    * GS Yuasa soars on battery JV with Bosch

    By Ayai Tomisawa
    TOKYO, June 20 (Reuters) - Japan's Nikkei share average fell
on Thursday morning, as weak China factory activity data further
unsettled markets coming to grips with Federal Reserve Chairman
Ben Bernanke's confirmation that the U.S. central bank could
trim its bond-buying programme later this year.
    The Nikkei was down 1.1 percent at 13,101.53 at the
midday break after briefly dipping below the 13,000 mark.    
    "The market's weakness shows that the Fed's decision to
indicate exit strategy was too soon," said Masaru Hamasaki,
senior strategist at Sumitomo Mitsui Asset Management.
    Bernanke said on Wednesday the U.S. economy is expanding
strongly enough for the Fed to begin slowing the pace of its $85
billion monthly purchases of Treasuries and mortgage-backed
securities, with the goal of ending it in mid-2014.
    Equity markets, which have been underpinned by the massive
liquidity support from the Fed and other major central banks in
recent years, were also left to ponder a further dose of bad
news from China.
    Data released earlier in the day showed China's factory
activity dropped to a nine-month low in June as demand faltered,
hurting manufacturers with exposure to Asia's biggest economy.
      Fanuc Corp dropped 2.3 percent, while Komatsu Ltd
 tumbled 4.3 percent.
    "Worries about China's weakening economy are not something
new, but it's certainly one of the major reasons to hit the
Japanese market a few weeks ago, so confirming its weakness
isn't positive," said Nobuhiko Kuramochi, a strategist at Mizuho
Securities.
    Real estate stocks were battered, with Mitsui Fudosan Co
 falling 1.7 percent, Mitsubishi Estate Co 
shedding 0.7 percent and Sumitomo Realty & Development 
tumbling 3.3 percent.
    But GS Yuasa Corp bucked the weakness, surging as
much as 11.1 percent after the German industrial group Robert
Bosch GmbH said it had agreed to work on
next-generation lithium-ion batteries with the battery maker and
Mitsubishi Corp.
    The broader Topix shed 0.9 percent to 1,096.25.
    But analysts said that the negative impact from the Fed's
stance should be short-lived as ending quantitative easing would
mean that the U.S. central bank is confident that unemployment
is falling and the real economy has returned to a self-sustained
recovery.
    "If the Fed makes this shift, it would be difficult to
imagine a prolonged downturn of U.S. and Japanese stocks because
a transition would be taking place from monetary policies to
corporate earnings as the driving force behind stock prices,"
Ryoji Musha, president of Musha Research, wrote in a note.
    Analysts also said that there are some technical signals
showing that Japanese stocks have hit a bottom, noting that the
Nikkei's 5-day and 25-day moving averages are rising.
    The Nikkei has lost 17.8 percent since hitting a 5-1/2 year
peak on May 23 on concerns over Fed stimulus as well as slowing
growth in China, Japan's second-largest export market, and
disappointment over Prime Minister Shinzo Abe's growth strategy
to revive the economy.
    It entered a bear market last week after dropping more than
20 percent from that multi-year high, but is still up 26 percent
this year.