Japan's Nikkei stock average lost 0.4 per cent today, weighed down by selling of smelters after non-ferrous metals prices fell, with concerns about consumer spending and Wall Street's performance leading to broad selling.
But buying of a range of defensive shares such as seafood company Nippon Suisan, which surged after a brokerage upgrade, kept the fall in check. A brokerage upgrade also boosted Sharp Corp
Activity waned as attention turned to struggling Japan Airlines and megabanks Mizuho Financial Group and
Sumitomo Mitsui Financial Group, all of which announce results after the close.
"I think a lot of investors want to see what New York stocks will do today after yesterday's slip, since there's a sense that New York may have peaked out," said Yutaka Miura, senior technical analyst at Mizuho Securities.
"This is especially true because this week's gains were made in very thin trade, which means that once it starts heading down, its slide may be slow but it will be steady, putting further pressure on Japanese shares."
US stocks fell yesterday as a stronger dollar weighed on commodity-linked shares and a guarded outlook from Wal-Mart Stores led to worries about consumer spending.
The Nikkei lost 0.2 per cent on the week for its third straight week of losses, the first such negative stretch since the three weeks end October 2nd. In thin trade, it lost 34.18 points on the day to close at 9,770.31.The broader Topix fell 0.1 per cent to 866.80.
Other analysts said that on top of selling by Japanese institutional investors, foreign investors appear to have shifted their stance slightly on Japanese stocks from neutral to selling.
"Earnings are mostly over and though many were strong, they were mainly factored in and didn't lead to buying, while the forecasts were fairly cautious," said Norihiro Fujito, general manager at Mitsubishi UFJ Securities.
"There's worry about bond issuance and growth here is really lagging. There's a lot of funds going to places like China, India and Indonesia."
Market players said that one key level for the Nikkei is 9,500, where a large number of put options have been placed. A put option gives the owner the right to sell.
Should the Nikkei touch this level it could fall rapidly, Fujito said, with the next key level being 9,000.
Banks edged up, with Mizuho Financial Group up 1.7 per cent at 179 yen and Sumitomo Mitsui Financial Group up 0.6 per cent at 3,240 yen. But Mitsubishi UFJ Financial Group, which announces results next week, fell 0.8 per cent to 508 yen.
"There's some buying on expectation that the fund-raising situation for these banks will be made clear when they announce earnings, which would remove one bad factor," said Hideyuki Ishiguro, a strategist at Okasan Securities.
"Any kind of concrete statement would help, even one announcing more funding, since that would ease uncertainty."
Bank shares lost ground over the last few months on worries they might have to issue more shares, raising dilution fears - the same worry that hit shipping shares, a day after Nippon Yusen announced it would raise up to $1.6 billion through a public share offering.
Nippon Yusen fell 3.5 per cent to 303 yen and Kawasaki Kisen K.K. lost 3.9 per cent to 298 yen. Mitsui OSK. Lines lost 1.1 per cent to 526 yen.
Shares of nonferrous metals smelters, such as Toho Zinc and Dowa Holdings, fell after industrial metals prices dropped yesterday due to a slight rebound in the US dollar and growing concerns about demand weakness after inventories of the metals rose.
But brokerage upgrades boosted some shares.
Market players said Nippon Suisan surged after Merrill Lynch raised its rating on Japan's second-largest seafood company to "buy" from "underperform", saying that the company's most recent results and full-year downward forecast revision indicated the bottom in earnings had been confirmed.
Sharp rose 3.8 per cent to 1,001 yen after Deutsche Securities raised its rating on the electronics maker to "buy" from "hold", citing a brighter outlook for its flat panel, solar cell and LCD TV operations.
Trade was thin, with 1.7 billion shares changing hands on the Tokyo exchange's first section compared with last week's daily average of 1.8 billion.
Declining shares outpaced advancing ones by 896 to 660.
Reuters