Nikkei tumbles to 6-month low on U.S. tech rout, Fast Retailing sinks

Thu Apr 10, 2014 9:44pm EDT

* Nikkei faces worst week since March 2011 tsunami falls
    * Fast Retailing slides on cut in full-year profit outlook

    By Hideyuki Sano
    TOKYO, April 11 (Reuters) - Japanese shares tumbled to
six-month lows on Friday and could log their worst performance
since the March 2011 tsunami and nuclear disaster after a rout
in U.S. tech shares spurred selling by momentum players.
    Fast Retailing, the benchmark Nikkei heavyweight
and casual clothing giant, sank after it cut its full-year
operating profit forecast when investors are already getting
nervous about fallouts from a sales tax hike this month.
    The Nikkei fell as much as 2.9 percent to 13,885.11,
its lowest level since early October, having fallen nearly 8
percent so far this week.
    If the losses are sustained, the Nikkei is on course to post
its biggest weekly fall since the week after devastating tsunami
and nuclear disaster hit the country in March 2011, when the
Nikkei fell 10.2 percent.
    "The sentiment was already weak after the Nikkei was unable
to maintain gains yesterday and then we had a sharp fall in the
Nasdaq. Momentum players are jumping onto this," said a trader
at a Japanese brokerage firm.
    Momentum investing entails buying stocks that are already
trending higher, often taking their price/earnings ratios to
extreme highs. When the mometum turns it can do so viciously as
investors rush to sell at the same time.
    The Nasdaq index dropped 3.1 percent, suffering its
biggest drop in two-and-a-half years on Thursday after their
sharp gains last year made their valuation expensive.
    Yet, the Nikkei is performing worse than the Nasdaq so far
this month, as Japanese shares are even more susceptible to
profit-taking after outsized gains last year, when the Nikkei
rose 57 percent.
    The Nikkei has fallen 6.2 percent since the start of April,
slightly more than 5.8 percent in the Nasdaq.
    Bulls think bottom fishing should emerge soon given that the
valuation of Japanese shares are hardly expensive, with the
Nikkei's P/E at around 13.
    But they think a rebound may have to wait until traders see
clearer evidence that the economy is in decent shape, both in
Japan and globally. 
    "We will have to see whether the U.S. economy is gaining
traction after the impact of a cold winter fades," said Ayako
Sera, senior market economist at Sumitomo Mitsui Trust Bank.
    The yen strengthened to 101.40 yen to the dollar,
just shy of last month's double top near 101.20 and not far from
year-to-date high of 100.755 hit in early February.
    Fast Retailing fell 6.8 percent after it cut its
full-year operating profit forecast as sales at domestic stores
of its Uniqlo casual wear brand fell below expectations, even
though the firm said it saw a limited impact from the sales tax
hike. 
    Another Nikkei heavyweight, SoftBank, shed 4.8
percent while high-end department store operator J. Front
Retailing fell on reports of a sharp drop in sales this
month after the sales tax hike.
    The yen's gains in the past few sessions are also thought to
be weighing on the market, though carmakers generally fared
better than electronics makers.
    Toyota and Honda both fell 0.6 percent
while Panasonic fell 2.1 percent.
    The broader Topix index fell 1.3 percent while the
new JPX-Nikkei Index 400 dropped 1.3 percent.
    

 (Editing by Eric Meijer)