December 4, 2012 / 3:10 AM / in 5 years

Nikkei falls as poor U.S. data triggers profit-taking on exporters

* Japanese equities' valuation no longer attractive -
    * Nikkei finds support at 9,400 - analyst
    * Sharp up more than 2 pct on Qualcomm deal
    * Paper companies drop on Merrill rating cuts

    By Ayai Tomisawa
    TOKYO, Dec 4 (Reuters) - Japan's Nikkei share average edged
down on Tuesday, trimming gains from a seven-month closing high
in the previous session as weak U.S. economic data triggered
profit-taking on exporters.
    By the midday break, the Nikkei was down 0.4 percent
at 9,420.26, moving further away from Monday's peak when it
pierced the psychologically important 9,500 resistance line for
the first time since April 27.
    Analysts said investors were wary of uncertainty over the
U.S. economy, which is key to the fortunes of Japan's exporters,
many of which rely on consumption in the world's biggest
    Manufacturing activity in the United States surprisingly
contracted in November, hitting its lowest level in more than
three years, while there has been no resolution to the country's
so-called fiscal cliff.  
    Canon Inc dropped 1.4 percent, Nikon Corp 
shed 2.9 percent and Nissan Motor Co fell 3.4 percent.
    "Investors are cautious about the market's sharp rise in the
past few weeks, and as soon as the Nikkei hit the 9,500-mark,
trading has slowed down. Investors started taking a wait-and-see
mode," said Hiroichi Nishi, general manager at SMBC Nikko
    The Nikkei should find support at 9,400 for Tuesday, he
    During the past 2-1/2 weeks, the benchmark has rallied 9.2
percent, led by exporters, as the yen has fallen on speculation
the Bank of Japan will be pushed to adopt aggressive policy
action after the Dec. 16 election. A weaker yen lifts the value
of exporters' overseas incomes when repatriated.
    The leader of the main opposition Liberal Democratic Party,
Shinzo Abe, has been calling on the Bank of Japan to take bolder
action, including setting a 2 percent inflation target and
embarking on "unlimited easing". The LDP is expected to win the
most seats and form the government after the election.
    "Such positive news for the currency has been priced into
the current market," said Kenichi Hirano, a strategist at
Tachibana Securities. "Foreign investors will likely hold
exporters at least until the election."
    The currency last traded at 82.06 yen to the dollar, down
from its 7-1/2-month low of 82.84 touched on Nov. 22 but still
above the 82 yen threshold. A fall below this level could
trigger selling in the equities market, analysts have said.
    Hirano also said that the recent rise in the Japanese market
has made it less of a bargain buy compared with global
    Japanese equities are slightly more expensive than their
European counterparts, with a 12-month forward price-to-earning
ratio of 14.9 versus STOXX Europe 600's 12.2, data from Thomson
Reuters Datastream showed. The S&P 500 carries a 12-month
forward P/E of 13.8.
    "Japanese shares are not attractive in terms of valuation.
Unless the yen weakens sharply from the current level, foreign
investors may not add more exporters for now," Hirano said.
    Bucking overall market weakness, struggling display panel
maker Sharp Corp gained as much as 2.9 percent to 177
yen in early trade after two sources familiar with the matter
said it and U.S. chipmaker Qualcomm Inc have agreed to
jointly develop next-generation displays. 
    Paper makers lost ground, with Hokuetsu Kishu Paper Co
, Oji Holdings Corp and Nippon Paper Group Inc
 falling between 2.7-4.3 percent after Bank Of America
Merrill Lynch cut their ratings.
    The broader Topix was down 0.2 percent at 780.38.

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