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