Nikkei hits 15-month closing low below 9,000

By Elaine Lies and Aiko Hayashi

TOKYO (BestGrowthStock) – Japan’s Nikkei average hit a 15-month closing low below 9,000 points on Tuesday, with hedge funds and foreigners seen selling amid mounting concern about the authorities’ inaction on a strong yen, which threatens a fragile economic recovery.

Market players said the close below the keenly-watched 9,000 level would likely feed downward momentum, with few technical targets to break the benchmark’s fall.

Market disappointment remained keen after Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa only spoke over the phone on Monday, foregoing a long-expected meeting, with no concrete action to counter yen strength that could hobble Japan’s export sector and hit the economy.

“Though nobody expects much from the government, the market really needs a strong message from the BOJ on measures to deal with deflation and the strong yen,” said Takashi Ushio, head of the investment strategy division at Marusan Securities.

“It would help if they did something, even something like solo intervention in the currency market.”

The dollar edged back down toward a 15-year low against the yen struck earlier this month, slipping below 85 yen in afternoon trade. The euro hit a nine-year low against the Japanese currency.. (FRX/: )

The benchmark Nikkei (.N225: ) shed 1.3 percent or 121.55 points to 8,995.14, its lowest close since May 2009, after earlier falling as far as 8,983.52. The broader Topix (.TOPX: ) lost 0.9 percent to 817.73.

Market players said foreign investors and hedge funds were sellers, but that much of the day’s slide was powered by individual investors losing heart and dumping shares.

A few said there appeared to be some light buying by pension funds at the lows and that some other investors could be bargain-hunting, but they added that most players were reluctant to take on the necessary risk.

So far this year, the Nikkei has been one of the world’s worst-performing markets, which analysts largely blame on the yen’s advance and its impact on exporters.

The MSCI Japan index (.MIJP00000PJP: ) is down roughly 10.4 percent so far this year, while the MSCI All-Country World Index (.MIWD00000PUS: ) has shed 5.9 percent in the same period.

By contrast, the MSCI index of Asia Pacific stocks outside Japan (.MIAPJ0000PUS: ) has fallen just 2.8 percent.

CURRENCY MOVES

“While countries around the world are letting their home currencies weaken to protect their economies, Japan isn’t doing anything about its currency,” said Kenichi Hirano, operating officer at Tachibana Securities.

“Whether that’s good or bad is beside the point at this stage, and Japan has to do the same as its peers in the world.”

The Nikkei’s next target stands at 8,697, a 61.8 percent retracement of the rally between its March 2009 low and April 2010 high, but few significant targets are seen below that.

“There aren’t a lot of natural stopping places, and in some situations we could see it fall in 500-point increments. On the charts, there aren’t a lot of good points to watch for either,” said Toshiyuki Kanayama, a market analyst at Monex Inc.

But by some technical measures, the Nikkei is starting to look oversold and perhaps due for a bit of a rebound.

Its relative strength index (RSI) fell to 36, with 30 and under considered oversold, while its slow stochastic fell into oversold territory.

The Nikkei also fell near its lower Bollinger Band.

Among the broad selling, exporters in particular lost ground, with Sony Corp (6758.T: ) falling 3.7 percent to 2,406 yen, Canon Inc (7751.T: ) sliding 0.9 percent to 3,520 yen and Tokyo Electron (8035.T: ) shedding 3.8 percent to 4,100 yen.

Nomura Real Estate Holdings (3231.T: ) fell 6.3 percent to 1,119 yen after Credit Suisse cut its rating on the company to “underperform” from “neutral,” citing the potential risk of valuation losses and uncertainty about the level of those losses.

But defensive stocks such as drugmakers, seen as resilient in the face of turbulent conditions overseas, bucked a slide in the overall market as exporters fell due to worries about the yen’s strength.

Eisai Co (4523.T: ) gained 1.5 percent to 3,055 yen and Daiichi Sankyo Co (4568.T: ) climbed 2.4 percent to 1,678 yen. Cosmetics firm Shiseido Co (4911.T: ) added 0.4 percent to 1,875 yen.

Trade was thin on the Tokyo exchange’s first section, with 1.5 billion shares changing hands, a day after booking volume of 1.28 billion yen, a two-week low.

Declining stocks outnumbered advancing ones by more than 2 to 1.

(Reporting by Elaine Lies; Editing by Joseph Radford)

Nikkei hits 15-month closing low below 9,000