Nikkei falls on weak global shares, strong yen; Bernanke in focus

Tue Jul 16, 2013 9:14pm EDT

* Upper house election result awaited
    * Mitsubishi Motors soars on dividend hike report

    By Ayai Tomisawa
    TOKYO, July 17 (Reuters) - Japan's Nikkei share average fell
on Wednesday as weakness in global markets and the strong yen
soured sentiment, with investors also cautious ahead of the U.S.
Federal Reserve chairman's appearance before Congressional
committees.
    The Nikkei dropped 0.8 percent to 14,486,27 in mid-morning
trade, with a support level seen at 14,400.
    The dollar dropped 0.70 percent to 99.14 yen on
Tuesday on expectations that Bernanke's testimony will reiterate
that U.S. monetary policy will remain extremely accommodative.
    Exporters led the declines, with Advantest Corp 
falling 2.9 percent, Nikon Corp dropping 1.7 percent
and Sony Corp shedding 0.6 percent.
    Bucking the weak trend, Mitsubishi Motors Corp 
soared more than 10 percent after the Nikkei said the carmaker
will likely pay out 30 to 40 percent of its profit to
shareholders for the year through March. 
    Market analysts said that with some technical signs starting
to show that the Nikkei would soon be overbought, a temporary
correction is possible. The Nikkei is currently trading 6.2
percent above its 25-day moving average of 13,644.33.
    "Investors are staying on the sidelines before the big
events. They hesitate to take large positions before (Federal
Reserve Chairman Ben) Bernanke's testimony and Japan's upper
house election," said Toshihiko Matsuno, a senior strategist at
SMBC Friend Securities. "Investors are focused on when the Fed
will scale back stimulus, and while the LDP's victory is widely
expected, they want to see the results before they bet on
anything."
    The Topix shed 0.2 percent to 1,208.15.
    Prime Minister Shinzo Abe's Liberal Democratic Party-led
bloc is expected to win a hefty majority in the upper house
election on July 21, ending a "twisted parliament" in which the
opposition controls the upper chamber.
    "Since an LDP/Komeito majority is widely expected by
investors, the net impact on the equity market would be neutral,
or potentially positive if the LDP wins a landslide victory,"
Goldman Sachs wrote in a report. "If, however, the LDP/Komeito
parties secure less than 64 seats, investors are likely to be
disappointed since the 'twisted Diet' situation would persist,
making legislation passage difficult."
    Market players said the market would shift its focus to
fundamentals after the election. April-June earnings are likely
to show solid results on factors such as improving domestic
economic conditions, recovery of U.S. demand, and depreciation
of the yen against the dollar since the same quarter last year. 
    "I expect that autos, electronics and semiconductor
manufacturing equipment makers will benefit from such good
factors," said Yutaka Yoshino, chief technical analyst at Nikko
Cordial Securities. "Some of these stocks have outperformed the
market even during the Nikkei's correction phase in June, and
these companies will likely continue outperforming."
    The Nikkei has fallen 9.1 percent from this year's peak of
15,942.60, but is still up 40 percent this year.