Japanese Stocks Slip, Led by Mitsubishi Tokyo, Komatsu Falls (2005-9-8)

Japanese stocks slid after reports showed that overseas buying of equities fell to the lowest in six weeks and machinery orders declined. Mitsubishi Tokyo Financial Group Inc. and Fanuc Ltd. dropped.

"Buying from foreign investors is slowing down and they\’ve been the driving force" behind gains in the stock market, said Koichi Ogawa, who helps oversee $28 billion at Daiwa SB Investments Ltd. in Tokyo. "The drop in machinery orders could be used as an excuse for investors to sell."

The Nikkei 225 Stock Average fell 95.13, or 0.8 percent to 12,512.46 as of 2:19 p.m. in Tokyo. The broader Topix index lost 9.65, or 0.7 percent to 1275.87. Banks and machinery makers accounted for almost a fifth of the index\’s decline.

Some investors are also selling ahead of elections on Sept. 11, which will decide whether Prime Minister Junichiro Koizumi can bolster his authority, according to Ogawa.

The Nikkei has climbed 6.6 percent since Koizumi called the election a month ago with the aim of ousting legislators within his own party opposed to his plan to put the management of the state-run postal system\’s 350 trillion yen ($3.17 trillion) in assets into the hands of private companies such as banks.

Koizumi\’s Liberal Democratic Party will probably win a majority in the Sept. 11 lower house elections, a Jiji Press survey showed this week. The LDP is projected to win 241 seats in the lower house, and 252 seats with coalition partner the New Komeito party.

Reasons to Sell

Government reports suggested the economy\’s recovery may be losing momentum. A report on Sept. 1 showed factory production dropped 1.1 percent in July, twice as much as economists expected, as surging oil prices reduced demand for exports. Household spending and retail sales also fell.

"A Koizumi victory has already been fully discounted, so in the short-term there\’s reason to sell," Ogawa said. "Plus, Japan\’s economy doesn\’t seem so strong."

Mitsubishi Tokyo, Japan\’s second-largest bank, declined 20,000 yen, or 1.8 percent, to 1.09 million yen. Sumitomo Mitsui Financial Group Inc., the nation\’s third-largest lender, dropped 3,000 yen, or 0.3 percent, to 881,000.

UFJ Holdings Inc., Japan\’s fourth-largest bank, declined 7,000 yen, or 1 percent, to 672,000.

Last week, foreign investors purchased the smallest amount of Japanese stocks since the week ended July 22, buying a net 249.8 billion yen, a Ministry of Finance report showed today.

Banks, Machinery Stocks

Banks have advanced 15 percent as a group since Koizumi called for elections on Aug. 8 on speculation that faster economic growth and a Koizumi victory will bolster the prospects for corporate earnings. The gain in banks was the biggest after steelmakers among the Topix\’s 33 industry groups.

A government report showed machinery orders fell 4.3 percent in July after jumping 11.1 percent a month earlier. Economists in a Bloomberg News survey had expected a 5 percent drop.

Fanuc, the world\’s largest maker of industrial robots, dropped 160 yen, or 1.9 percent, to 8,180. SMC Corp., which makes air filters, dropped 320 yen, or 2.3 percent, to 13,810. Komatsu Ltd., the world\’s No. 2 maker of construction equipment, lost 29 yen, or 2.2 percent, to 1,313.

Energy stocks dropped after oil prices in New York touched a two-week low. Inpex Corp., Japan\’s biggest oil explorer, fell 26,000 yen, or 3.1 percent, to 814,000. AOC Holdings Inc., its smaller competitor, dropped 45 yen, or 2.2 percent, to 2,030.

Crude oil futures for October delivery lost 2.4 percent to close at $64.37 a barrel in New York. Futures touched $63.90, the lowest since Aug. 19. Futures were 9.1 percent below a record $70.85 reached last week. The contract was recently at $64.85 in after-hours electronic trading.

\’Take a Hit\’

"Resource-related shares are bound to take a hit" because the of the drop in oil prices, said Yutaka Miura, an equities manager at Shinko Securities Co. in Tokyo.

Trading companies, which have invested in energy-related projects, also fell. Mitsubishi Corp., Japan\’s biggest trading company, lost 21 yen, or 1.1 percent, to 1,843. Mitsui & Co., the second biggest, dropped 21 yen, or 1.8 percent, to 1,152.

Mitsubishi and Mitsui together own about half of the Sakhalin- 2 project in Russia, the world\’s largest development project for crude oil and natural gas.

Elsewhere, FDK Corp. soared 33 yen, or 14 percent, to 275, advancing for a second day. The maker of ceramic components for electronics developed a fast-recharge storage battery that is more durable than lithium ion batteries, the Nihon Keizai newspaper said yesterday, sending the stock up by 26 percent.
£¨Source:Bloomberg)