Sunday, October 18, 2009

Nikkei Slump On Earning Report, JAL Advances

. Sunday, October 18, 2009

By stockOzone team

Japan's Nikkei stock average fell 0.1 percent on Monday, with exporters such as Kyocera Corp (6971.T) down after disappointing U.S. corporate earnings robbed the market of upward momentum sparked by earlier upbeat results.

But the benchmark pared most of its losses in late trade as short-covering emerged and other Asian share markets rose, while struggling Japan Airlines Corp (9205.T) climbed 10 percent after losing 26 percent of its value last week, staging what market players said was a rebound on a sense the stock had fallen too far.

The Sankei newspaper reported on Sunday that the Japanese government task force set up to keep JAL afloat has decided to tap a state-backed institution tasked with revitalising struggling companies.

"Overall, global stock markets are doing well and the yen's retreat against the dollar compared to last week's levels is contributing to a good environment for the Nikkei," said Noritsugu Hirakawa, a strategist at Okasan Securities.

"What we're seeing is just profit-taking, with Wall Street's Friday fall providing the excuse, along with a sense that the market may have risen too far, too fast."

The benchmark Nikkei lost 9.21 points to 10,248.35 after earlier falling as much as 1.3 percent. The broader Topix rose 0.4 percent to 904.29. "Basically activity today is dominated by short-term traders, who are buying on dips after selling at the highs. The market is also paring its losses in tandem with movements in the rest of Asia," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.

A broad range of exporters lost ground, with Kyocera Corp down 0.9 percent to 8,010 yen and Honda Motor Co (7267.T) down 0.5 percent to 2,765 yen.

Fast Retailing (9983.T), owner of the Uniqlo casual-clothing chain, fell 3 percent to 14,860 yen after JP Morgan cut its rating on the stock to "underweight" from "neutral," citing its recent sharp gains.

"The share price has risen 45 percent from its recent low (September 18) in less than one month, so we think most of the good news is probably now discounted," JP Morgan analyst Chiaki Hirota wrote in a note.

But JAL rose to 112 yen, though market players warned these gains might well be temporary in the face of the company's challenges.

"There are a lot of problems such as the cost cuts that are being demanded in areas such as pay and pensions, and since this doesn't just affect current JAL employees but its pensioners, the issues have deep roots and will take quite a long time to resolve," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

Disclosure: Author does not own any of the stocks discussed here.

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