Nikkei dips on yen, volume lowest since late Oct

By Ayai Tomisawa and Chikafumi Hodo

TOKYO (BestGrowthStock) – Japan’s Nikkei slipped on Monday after weak U.S. jobs data and a renewed focus on U.S. quantitative easing pushed the dollar down against the yen, spurring profit-taking in Tokyo stocks after they hit a six-month high last week.

But overseas fund operators and Japanese retail investors were looking to buy on dips, limiting losses for the Nikkei, analysts said.

Tokyo stocks traded in a narrow range, with volume falling to the lowest since late October, as investors took a wait-and-see stance amid a lack of fresh market incentives, analysts said.

“Exporters are under pressure as the yen strengthened, and that is weighing on the Nikkei. But falls are limited as we are seeing solid bargain-hunting,” said Takashi Ohba, senior strategist at Okasan Securities.

“Underlying bullish sentiment for Japanese stocks really hasn’t changed. The Nikkei still has room to rise,” he said.

The Nikkei closed the day down 0.1 percent or 11.09 points at 10,167.23, while the broader Topix index rose 0.3 percent to 881.41.

Market participants said the Nikkei is expected to be supported as overseas fund operators still have not completed covering their underweight positions in Japanese shares.

“I think foreign funds are still underweight Japanese stocks so they still need to cover those positions as they have performed well recently,” said Tomomi Yamashita, fund manager at Shinkin Asset Management.

The Nikkei has sharply outperformed other major markets over the past month, including Hong Kong, Shanghai and New York’s Dow Jones industrial average.

Market participants said the Nikkei is likely to find support around 10,000, while resistance is seen around 10,250 — near the six-month high reached last week.

DOLLAR/YEN EYED

The Nikkei could be weighed down if the yen extends its recovery, analysts said.

“Low trading volume is exacerbating the mood,” said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, adding that trading volume is expected to stay low if foreign investors don’t chase the market higher.

“Japanese investors tend to sell at high prices when buying by foreigners kicks in,” he said.

On Monday, 1.48 billion shares changed hands on the Tokyo exchange’s first section, the lowest since October 25 and well below last week’s daily average of 1.81 billion.

Fujito said the dollar’s level against the yen will likely determine the Tokyo market’s direction over the next few weeks, and if the dollar falls below 82 yen, the Nikkei may drop to around 10,000.

The dollar recovered against the yen on Monday and was trading up 0.4 percent at 82.85 yen, but it remained under pressure following worse-than-expected U.S. payroll data last week.

U.S. employment barely grew in November and the jobless rate unexpectedly hit a seven-month high, hardening views the Federal Reserve would stick to its $600 billion plan to shore up the anemic recovery.

Among exporters, Panasonic dropped 1.2 percent to 1,191 yen.

But JFE Holdings Inc gained 2.1 percent to 2,730 yen after the firm said last week it aimed to raise its average steel price by about 5 percent next quarter for automakers, shipbuilders and other steel users in Japan.

Shares of Touei Housing Corp soared 22 percent to 1,313 yen after the Tokyo-area homeseller lifted its 2010/11 earnings forecast amid declining costs for real estate sites and construction services.

(Additional reporting by Antoni Slodkowski; Editing by Chris Gallagher)

Nikkei dips on yen, volume lowest since late Oct