Nikkei falls 1.3 pct as techs slip, Toyota rating cut

* Talk of possible long liquidation in Nikkei futures

* Chip-related shares and other techs falter

* Toyota extends losses after Moody’s cuts its ratings

* Nikkei’s fall below 25-day MA adds to weakness-fund manager

By Elaine Lies

TOKYO, April 22 (BestGrowthStock) – Japan’s Nikkei average fell 1.3
percent on Thursday as tech shares slipped, with traders saying a
weaker futures market and the break of a key technical level
helped trigger long liquidation after the previous day’s rally.

Toyota Motor Corp (7203.T: ) briefly extended earlier losses
after Moody’s Investors Service cut the recall-hit firm’s credit
ratings, saying that it expected the automaker’s current low
profitability to continue and that litigation costs could be
significant. [ID:nTOE63L03A]

Despite the Nikkei climbing 1.7 percent on Wednesday for its
biggest one-day percentage gain in more than a month, market
players were unconvinced that a pullback for the benchmark that
began in early April was over.

A lower finish for Nikkei futures in Chicago (2NKc1: ) compared
to their Osaka close (JNIc1: ), a drop in U.S. stock index futures
(SPc1: ), and the Nikkei’s open below its 25-day moving average
likely provided impetus for short-term speculators to cut some of
their long positions, market players said.

“The fall in futures really exaggerated the Nikkei’s slide
this morning, with a lot of investors trying to take profits out
of worry that the correction hasn’t ended,” said Takashi Ushio,
head of the investment strategy division at Marusan Securities.

“But high expectations for earnings continues to provide some
support, helping the Nikkei pare its losses in later trade.”

Other market players said that short-covering emerged in
futures during afternoon trade, helping the benchmark Nikkei trim
losses that at one point took it down 2 percent.

The benchmark Nikkei (.N225: ) fell 140.96 points to 10,949.09
after opening below its 25-day moving average, now near 11,070.

The 25-day average is a popular technical indicator among
Japanese equities investors, and a clear break below the line is
often seen as a sign that the market may have more room to fall.
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Nikkei chart http://link.reuters.com/pyg88j
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Initial support lies near 10,800, roughly a 38.2 percent
retracement of a two-month rally that started in early February
and pushed the Nikkei up to an 18-month peak of 11,408.17 in
early April. Below that, a 50 percent retracement of that same
rise lies roughly around 10,650, just under the Nikkei’s 75-day
moving average.

The previous day’s surge was driven by aggressive buying of
Nikkei 225 futures (JNIc1: ) and Topix futures (JTIc1: ) by a
European brokerage house, said Hideki Horikawa, senior adviser
for Himawari Securities’ investment advisory division.

“They are known to trade in a manner that leads to higher
volatility,” Horikawa said. “They often trade persistently in the
direction of triggering stop-loss buy backs or long liquidation.

“The same firm is probably selling today,” he said.

TOYOTA TROUBLES

Toyota fell as much as 1.9 percent after the Moody’s
downgrade, but then cut its losses to close down 1.4 percent at
3,600 yen, with market players saying they thought the impact of
the downgrade would be limited.

“Market worries and unfavourable factors about Toyota have
pretty much been factored in during the course of its share price
decline that started in January,” said Mitsushige Akino, chief
fund manager at Ichiyoshi Investment Management.

“The downgrade is reflecting the concerns market players felt
back in January.”

Tech shares fell broadly as investors moved to take profits
after a sharp climb on Wednesday in the wake of
better-than-expected results from Apple, though a few shares
bucked the trend.

Ricoh Corp (7752.T: ) climbed 3.4 percent to 1,554 yen, the
biggest percentage gainer among Nikkei 225 components, after
lifting its profit estimate 44 percent on cost cuts and
recovering demand. [ID:nTOE63K07A]

Hitachi Corp (6501.T: ) gained 2.3 percent to 403 yen after its
hard drive unit projected a strong 2010, with its sales up 42
percent from a year earlier. [ID:nTOE63L024]

Trading volume was moderate, with 2.2 billion shares changing
hands on the Tokyo exchange’s first section.

That was up from a two-week low of 1.95 billion shares hit on
Tuesday, but remained below a one-month high of 2.39 billion
shares reached in early April.

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(Additional reporting by Masayuki Kitano; Editing by Hugh
Lawson)

Nikkei falls 1.3 pct as techs slip, Toyota rating cut