Wednesday, March 2, 2011

Nikkei falls 2.4 pct, erases most of last 3 days' gains

TOKYO: Japan's Nikkei average fell more than 2 percent on Wednesday, March 2, erasing most of the gains made over the past three days as a climb in oil prices and uncertainty in the Middle East prompted investors to take profits.

But Yahoo Japan surged after sources said Yahoo Inc is in advanced talks to transfer its 35 percent stake in Yahoo Japan to Softbank Corp, a deal that could be worth as much as $8 billion.

Futures-led selling pushed down the benchmark, although it has still gained 2.6 percent since the beginning of the year and some 14 percent since last November.

"Before Nikkei 225 futures and options settlement next week, hedge funds sold futures as they expect them to settle lower than current levels," said Hiroichi Nishi, general manager at Nikko Cordial Securities."It's a futures-led sell-off."

Analysts said that in view of the market's run-up in the last three days, it was only natural that profit-taking emerged in futures when the Nikkei broke support around 10,580-10,600.

The benchmark Nikkei dropped 2.4 percent, or 261.65 points, to 10,492.38 and the broader Topix lost 2.2 percent, to 942.87. Oil vaulted over $116 per barrel on Wednesday as concerns rose that escalating tensions in Libya would spread in the Middle East and disrupt fuel supplies.

"It makes sense to take some risk off the table," said Stefan Worrall, director of equity at Credit Suisse. Yahoo Japan rose as high as 34,600 yen after ending up 3.7 percent at 32,300 yen after people with knowledge of the discussions said a deal could come within a few weeks.

"Investors may be assuming that there will be a premium to the current Yahoo Japan share price when they are sold," said Makoto Kikuchi, chief executive officer at Myojo Asset Management Japan. "If the deal is finalised, it means that Yahoo Japan will completely be under Softbank's umbrella.

While Softbank focuses on its mobile phone business, Yahoo Japan will likely strengthen its Internet and cell phone content businesses so there will likely be synergy."

Softbank Corp lost 3.6 percent to 3,255 yen and was one of the most actively traded stocks by turnover on the Tokyo Stock Exchange's main board.

Sharp Corp lost 4.8 percent to 846 yen, the biggest percentage loser on the Nikkei, after Morgan Stanley MUFG Securities cut its rating to "equal-weight" from "overweight". Volume was relatively thin, with 2.19 billion shares changing hands on the Tokyo Stock Exchange's main board, which was lower than the last week's average daily volume of 2.37 billion. Declining shares outnumbered advancing ones by 1,553 to 76. - Reuters

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