Tuesday, August 24, 2010

Nikkei down 1 pct, pressured after breach of 9,000

TOKYO: Japan's Nikkei average fell below the closely watched 9,000 mark for the first time in 15 months on Tuesday, Aug 24 with some analysts noting selling by hedge funds and foreigners as concern mounted over the fragile economic recovery.

The 9,000 to 9,100 area had been strong support for the benchmark Nikkei since last year and several attempts this month to break through on the downside to a fresh 13-month low had been checked just under 9,100.

If the Nikkei ends the day below 9,000, that will add to downward momentum with few technical targets to break its fall, market players said.

"Selling by hedge funds and European investors appears to be hurting stocks and if the Nikkei goes further below 9,000, unloading by individual investors will also likely accelerate," said Masayuki Otani, chief market analyst at Securities Japan Inc.

"Worries about the economy will not go away overnight, and investors will closely watch what measures emerge, including steps aimed at fending off a so-called double-dip recession in the U.S. economy."

The benchmark Nikkei fell as low as 8,983.52, its lowest since May 2009, before paring losses to 9,021.78, down 1 percent on the day.

The broader Topix retreated 0.9 percent to 817.24.

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 there are not many significant targets below that level, market players said.

"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.

The Nikkei fell 0.7 percent the previous day to its lowest close since Nov. 27, 2009, also dented by selling from what some market players said were hedge funds and foreigners.

Market players noted disappointment that Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa only spoke over the phone on Monday instead of holding a long-expected meeting, with no concrete action to counter a strong yen that threatens Japan's export sector and its fragile recovery.

"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.

In early Asia trade, the dollar inched down to 85.11 yen, falling towards a 15-year low of 84.72 yen hit earlier this month. The euro slipped to 107.53 yen.

U.S. stocks edged down in one of the lightest volume sessions of the year on Monday as investors took refuge in defensive shares after the latest flurry of corporate M&A activity failed to soothe concerns about the economy.

Analysts said the recent spate of acquisition news was fuelled by corporate profits from cost cutting rather than from revenue growth, and highlighted the economy's weakness.

Exporters lost ground, with Sony Corp losing 2.4 percent to 2,439 yen, Canon Inc sliding 1.3 percent to 3,505 yen and Tokyo Electron shedding 2.5 percent to 4,155 yen. - Reuters

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