March 22, 2013 / 7:15 AM / 5 years ago

Nikkei hit by Cyprus woes, posts biggest weekly fall since Nov

* Nikkei drops 2.4 pct on day, slips 1.8 pct for the week
    * Exporters with high exposure to Europe falter
    * Investors lock in profit before weekend as Cyprus bailout
    * Foreigners seen buying Japanese stocks in long-term -

    By Tomo Uetake
    TOKYO, March 22 (Reuters) - Japan's Nikkei average shed 2.4
percent on Friday as concerns mounted that Cyprus may be forced
to exit the euro zone after the European Union gave the island's
government until Monday to raise the billions of euros it needs
to secure a bailout. 
    The Nikkei ended 297.16 points lower at 12,338.53,
retreating from 12,650.26 hit on Thursday, its highest intraday
level since early September 2008. 
    The benchmark lost 1.8 percent on the week, its second
weekly loss out of the past 19 weeks and the biggest weekly
decline since November.   
    Exporters with high exposure to Europe led the declines,
with Mazda Motor Corp dropping 2.7 percent, Nikon Corp
 losing 3.2 percent and Shimano Inc shedding
6.3 percent.
    "These are some of the stocks which investors want to unload
when uncertainty over Europe grows," said Naoki Fujiwara, a fund
manager at Shinkin Asset Management.
    Stock losses accelerated in the afternoon trade, especially
in the last 10 minutes, as investors locked in profits before
the weekend.
    "They were quick to take profits as they are worried that
U.S. stocks may fall later in the day on Cyprus fears," said
Kenichi Hirano, a strategist at Tachibana Securities.
    The heightened worries about Cyprus and risk of contagion in
 the euro zone have seen investors seek shelter in the
safe-haven yen. That has put pressure on the Nikkei as investors
fret the recent weakening trend in the yen may stall and
undermine the export-driven economy.
    The yen was quoted at 94.71 to the dollar on Friday
after gaining 1.2 percent on Thursday, and was up 0.2 percent
against the euro at 122.13 after rising 1.5 percent on Thursday.
    If the government of Cyprus fails to secure enough funds, it
could face a collapse of its financial system that could push it
out of the euro currency zone. 
    The broader Topix dropped 1.9 percent to 1,038.57 in
a relatively light trade, with 2.46 billion shares changing
hands, compared with last week's average daily volume of 3.72
    "Yesterday's rally (to a fresh 4-1/2-year high) gave the
market a feeling of some accomplishment. So investors locked in
profits before the weekend," said Yuya Tsuchida, a strategist of
Toyo Securities.
    "Unless significant progress is made on Cyprus problem or
(Bank of Japan Governor Haruhiko) Kuroda calls an emergency
board meeting, investors are likely to be in risk-off mode for a
while, probably until the Bank of Japan's first policy meeting
(on April 3 and 4)."
    The Nikkei has gained about 19 percent this year, and the
yen has weakened 9 percent on the back of Prime Minister Shinzo
Abe's bold fiscal expansionary and monetary easing policies
aimed at ending persistent deflation and reviving the economy.
    On Thursday, Kuroda said in his inaugural news conference
that further bold easing measures were needed to beat deflation.
    With Kuroda providing few clues on calling an emergency
meeting before April 3-4 to push through stimulus, analysts said
the Nikkei is unlikely log big gains ahead of the meeting.
    In the longer term, however, as the recovery in the U.S.
economy gathers momentum, foreign investors are likely to pour
more money into Japanese equities, analysts said.
    In the past 18 weeks through March 16, foreign investors
bought 5.83 trillion yen ($61 billion) worth of Japanese stocks,
versus 5.80 trillion yen in their 19 straight weeks of net
buying from late 2005 to early 2006 when Junichiro Koizumi was
the prime minister.
    "The Japanese market could see solid gains in the long run
if the U.S. economy's recovery strengthens the dollar; then we
may get similar rallies to those seen back in 2005-2006 if the
dollar trades around 120 yen like it did at that time," said
Michiro Naito, executive director of equity derivatives strategy
at JPMorgan.
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