* Nikkei sags 3.2 pct, Topix down 3.4 pct
* Nikkei could fall to low of 13,000 - Bayview Asset
* Goldman Sachs maintains 12-month Nikkei target at 17,000
By Dominic Lau
TOKYO, May 27 Japan's Nikkei share average
skidded 3.2 percent on Monday in an increasingly tense market
after last week's turbulent trade that sent the benchmark
reeling to its worst one-day loss in two years.
The Nikkei ended down 469.80 points at 14,142.65
after trading as low as 14,027.42. Monday's drop broke below the
index's 25-day moving average of 14,333.11 but held above
13,990, the 61.8 percent retracement of its slide from February
2007 to October 2008.
A combinations of factors, including worries the U.S.
Federal Reserve will roll back its stimulus this year and weak
factor activity data from China, Japan's second-biggest export
market, triggered last week's sharp selloff.
The sour mood extended to Monday.
Yasuo Sakuma, portfolio manager at Bayview Asset Management,
said he expected the Nikkei to correct to as low as 13,000, 8
percent below where the benchmark closed on Monday.
"Just before the sharp decline on Thursday, I have been
decreasing equity positions and increasing cash position. I cut
back on equity positions further from last Thursday," Sakuma
said, adding that he had raised the cash level to 15 percent
from fully invested two weeks ago in his 15 billion yen ($150
million) long-only fund.
However, he said he had not increased his short positions in
his long/short fund because he was concerned of a short squeeze
following steep declines.
Automaker Toyota Motor Corp lost 5 percent and was
the second-most traded on the main board by turnover, while
Japan's top brokerage Nomura Holdings, which was the
third-most traded, lost 3.6 percent.
The benchmark plunged 7.3 percent on Thursday, its biggest
single-day percentage loss since the March 2011 earthquake and
tsunami. It had another volatile session the following day,
traversing a 7.1 percent range between positive and negative
territory before ending up 0.9 percent.
Societe Generale said the most-trade Nikkei index stock
options was a put with a strike price of 11,500 and a June
expiry. The next most traded was a call at 16,000, followed by
another put at 12,000.
The broader Topix index sank 3.4 percent to 1,154.07
on Monday, with 3.98 billion shares changing hands, down from
last week's daily average of 6.21 billion shares but slightly
ahead of this years' daily average of 3.91 billion.
Nomura Securities recommended investors look for stocks with
strong earnings amid the volatile market.
Among the stocks it highlighted were Suzuki Motor Corp
, auto parts maker Denso Corp, watch maker
Citizen Holdings, West Japan Railway Co,
musical instrument maker Yamaha Corp, Daido Steel Co
and electric machinery maker Fuji Electric Co.
Despite the market turbulence, the Nikkei has risen 36
percent this year, and is still up 14.5 percent since April 4,
when the Bank of Japan announced a sweeping monetary expansion
campaign to beat years of deflation and revive growth.
"The market will remain range-bound for the next one to
three months," Goldman Sachs wrote in a note.
"The next major catalysts may come after the July Upper
House elections, when we could see a string of evidence
confirming that the economy and profits are on a solid recovery
path, starting with the Q2 GDP release and Q1 FY2013/14 earnings
results during late July/August."
The brokerage maintained its 12-month Nikkei target of
17,000, 20 percent above Monday's close.