Nikkei hits lowest close in over 5 month

By Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei average edged down 0.3 percent to its lowest close in more than five months on Monday as investors remained wary about taking on more risky assets without assurance that a recent stock slide is over.

Exporters lost ground, but most banks gained in the wake of rises by their U.S. peers, which led Wall Street higher a day after the U.S. Senate approved a sweeping regulatory overhaul of Wall Street firms that analysts said appeared less onerous than many had feared.

The Nikkei extended losses that last week saw it fall 6.5 percent for the week, its worst weekly performance in over a year, at one point falling to 9,693.07 — its lowest since early December.

But a bounce in China’s main share market of 3.2 percent and a slightly weaker yen both helped the benchmark Nikkei pare its losses.

“There’s a sense that overseas stock markets may be starting to settle down,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

“But with so much uncertainty about the global economy there’s not much reason to buy stocks, and there’s still a lot of risk reduction going on.”

Market players said that hedge funds and commodity trading advisers (CTAs) appeared to still be selling, with little chance of a rebound until their selling comes to an end. Others said Japanese institutional investors were selling as well.

Japanese retail investor sentiment toward domestic stocks deteriorated sharply in May, falling from its best level in nearly three years due to deepening worries about the euro zone’s debt crisis, a Reuters poll released on Monday showed.

The Nikkei shed 26.14 points to 9,758.40 although it turned briefly positive in afternoon trade. The broader Topix was flat at 880.01.

Technical indicators suggest the Nikkei is oversold, but continuing uncertainty, particularly about moves in the currency market, will inhibit gains, market players said.

“The euro zone problems haven’t been cleaned up yet and even though the global economy is definitely showing more signs of recovery than it did six months ago, worry continues that the euro zone’s woes will put a brake on this growth,” said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.

The Nikkei’s relative strength index (RSI) has fallen to 28, its lowest since late November. Anything below 30 is considered oversold.

Market players said support for the Nikkei lies around 9,500, a key psychological level, but that if the benchmark break below this, the next target will be its November low at 9,076, which is also around the level of a 50 percent retracement of its 2009-2010 rebound.

EXPORTERS, BANKS

The yen advanced but later fell back against the dollar, with the U.S. currency edging up 0.2 percent to 90.21. But the euro was down 0.3 percent against the Japanese currency at 112.86 yen..

Exporters lost ground, with Canon Inc down 0.4 percent at 3,710 yen and chip tester maker Advantest Corp down 1.1 percent at 2,045 yen. Kyocera Corp lost 0.5 percent to 8,060 yen.

But most large banks rose, with Mizuho Financial Group up 3.1 percent to 165 yen and no. 3 bank Sumitomo Mitsui Financial Group up 1.1 percent to 2,729 yen. Top lender Mitsubishi UFJ Financial Group, though, slipped 0.2 percent to 443 yen.

Shipping firms Kawasaki Kisen K.K. and Mitsui O.S.K. Lines powered higher after Nomura Securities upgraded both to “buy” from “neutral” and raised their target prices, citing expectations for profits from container shipping in the year ending March 2011.

Kawasaki Kisen gained 3.9 percent to 343 yen and Mitsui O.S.K. Lines rose 2.6 percent to 624 yen.

Trade was moderate, with 2.2 billion shares changing hands on the Tokyo exchange’s first section. Advancing shares outnumbered declining ones, 781 to 758.

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(Reporting by Elaine Lies; Editing by Joseph Radford)

Nikkei hits lowest close in over 5 month