Nikkei drops on China worries; Topix volume hits lowest since mid-Dec

Mon Jun 24, 2013 3:23am EDT

* China factors lead shares to reverse course
    * Construction equipment makers, Fanuc underperform
    * Weaker yen lifts some exporters
    * Volatility still present - fund manager

    By Ayai Tomisawa
    TOKYO, June 24 (Reuters) - Japan's Nikkei share average fell
on Monday in choppy trade as worries about Chinese economic and
financial stability soured investor sentiment, dragging down
China-related stocks such as construction equipment makers and
some exporters.
    The benchmark Nikkei, which climbed as much as 1.5
percent early in the session, ended the day down 1.3 percent at
13,062.78.
    Of 33 Topix subsectors, 25 were lower, with China-related
stocks have the largest declines.
    The Nikkei China 50 index fell 1.9 percent. Komatsu
Ltd dropped 4.6 percent and Hitachi Construction
Machinery Co by 3.7 percent. Fanuc Corp 
skidded 2.3 percent and Nissan Motor Co slid 3.4
percent.
    Early on Monday, the Nikkei rose, supported by a weak yen.
But a sell-off in other Asian markets, which were in oversold
territory, erased the gains.
    China bank shares led the downward spiral after official
news reports at the weekend suggested Beijing would continue to
keep monetary policy tight. 
    In the mid-morning, "the Chinese market changed the mood
completely. The Nikkei gave up its earlier gains immediately
after the Chinese market opened," said Kyoya Okazawa, head of
global equities and commodity derivatives at BNP Paribas in
Tokyo.
    "Global markets have just started pricing in the end of
China's high-growth period and investors are backing away from
emerging markets," added Okazawa.
    The Topix dropped 0.9 percent to 1,089.64 in thin
trade, with only 1.63 billion shares changing hands, the lowest
level since mid-December. 
    Analysts said that as the Nikkei has corrected to a
comfortable level after dipping below the 13,000 mark for
several times over the past few weeks, sharp selling is
unexpected in the coming days. But volatility still exists as
such investors as hedge funds continue to take short-term
positions over different asset classes, they added.
    "It's not just about a co-relation between Japanese stocks
and the yen anymore. Investors are monitoring U.S. futures'
moves during Asian trading hours," said Hiroyuki Fukunaga, the
chief executive of Investrust, adding that investors who invest
in risky assets globally are mainly interested in buying
industrialised nations' stocks, such as U.S. and Japanese ones.
    "The Nikkei's recent correction has brought its valuation 
closer to the Dow Jones Industrial Average's valuation. When
U.S. futures are lower, Japanese shares are likely to fall, so
we need to monitor U.S. futures as well," Fukunaga said.
    The Nikkei's trading at 12.4 times its expected earnings,
while the Dow Jones Industrial Average is trading at 12.1
times, according to Thomson Reuters StarMine.
    The dollar last traded at 98.46 yen after earlier
touching 98.72 yen, its highest since June 11.
    Some exporters rose, with Tokyo Electron Ltd rup
2.4 percent and Advantest Corp 2.8 percent.
    SoftBank Corp also bucked weakness, rising 0.7
percent after CEO Masayoshi Son said on Friday he was confident
his company's acquisition of Sprint Nextel Corp would be
completed in early July after rival bidder Dish Network Corp
 bowed out.
    Separately, Nomura Securities raised SoftBank's target price
to 6,430 yen from 6,030 yen, citing the company's stake rise in
Alibaba Group Holding and its upward revision in earnings
forecast for internet business Yahoo Japan.

 (Editing by Richard Borsuk)