Nikkei ends down 1.1 per cent as techs slide
Japanese shares close down 201.69 points, while the broader TOPIX index touches a low of 1,758.65.Updated: Jul 18, 2007 14:04 IST
Japan's Nikkei average fell 1.1 per cent on Wednesday with technology shares such as Shin-Etsu Chemical Co losing ground after lacklustre results from chip giant Intel Corp raised concerns over high-tech demand.
Shares of Tokyo Electric Power Co Inc (TEPCO) slid 4 per cent after it said it had found some 50 problems at its Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture after a strong earthquake hit the area on Monday.
Masayuki Kubota, fund manager at Japanese Equity Management Group of Daiwa SB Investments, said strong economic growth in developing countries is increasingly playing a key role for many Japanese companies and any firms that do not benefit from it are falling out of investors' favour.
"Technology companies, especially home electronics makers, face price competition and demand for such products in emerging markets is not strong. It's more like industrial electronics products that are in strong demand," said Kubota.
The Nikkei closed down 201.69 points at 18,015.58 while the broader TOPIX index lost 1.1 per cent to 1,758.65. Norihiro Fujito, general manager at Mitsubishi UFJ Securities' investment research and information division, said U.S. subprime mortgage problems could also bring down the financial sector there after Bear Stearns said two hedge funds that bet heavily on risky subprime loans now have "very little value", adding to investor worries in Japan about U.S. stock moves.
Trade volume was moderate with 2.2 billion shares changing hands. Decliners swept past advancers by a ratio of five to one.
High tech lower
Shares of high-tech stocks declined with Shin-Etsu Chemical down 1.8 per cent at 9,190 yen and Canon Inc retreated 1.8 per cent to 7,010 yen.
Intel posted a 44 percent rise in quarterly profit on Tuesday but gross margins missed its target and shares fell nearly 5 percent in extended-hours trading.
Some technology stocks lost ground due to downgrades by Credit Suisse.
Pioneer Corp fell 3.3 per cent to 1,645 yen after the brokerage lowered its rating to "underperform" from "neutral", citing an increased risk of a slowing plasma display panel market.
Likewise, Casio Computer Co Ltd fell 1.6 per cent to 1,885 yen after being downgraded to "neutral" from "outperform" and the target price was cut to 1,850 yen from 2,800 yen.
Fast Retailing Co. Ltd. extended its losses into a fourth session on concern about its profit prospects. The stock dropped 4.4 per cent to 7,280 yen, becoming the biggest drag on the Nikkei.
Kubota of Daiwa SB Investments said shares of companies that rely on domestic demand are not attractive because of some structural problems.
"Before bad weather and anything else, there are structural problems such as an expected rise in consumption tax and the ageing society," he said. The Japanese government plans to discuss fiscal reforms, including a possible hike in consumption tax, this autumn.
The impact of the earthquake that hit northwest Japan on Monday weighed on some auto shares. Riken Corp., a major Japanese maker of piston rings for cars, said on Wednesday it was unclear when production would resume at quake-hit plants, potentially disrupting output from Japan's auto factories.
Fuji Heavy Industries Ltd, the maker of Subaru cars, said it would suspend production on a mini-vehicle assembly line in Japan due to the stoppage of production at Riken.
Shares of Riken were down 1.4 percent at 616 yen and those of Fuji Heavy fell 1.8 per cent to 592 yen.