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Nikkei falls 2.2% as banks tumble

Nikkei falls 2.2% as banks tumble
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First Published: Fri, Aug 01 2008. 09 31 AM IST
Updated: Fri, Aug 01 2008. 09 31 AM IST
By Taiga Uranaka / Reuters
Tokyo: The Nikkei average fell 2.2% on Friday, as electronics maker NEC Corp plunged 14% on a sharp drop in quarterly earnings and a ratings cut by a brokerage, while banks slid on sharp profit declines.
Electronics device maker TDK Corp also tumbled after cutting its outlook following a sharp fall in quarterly profit, and announcing plans to buy German electronic parts manufacturer Epcos AG for $1.9 billion in cash.
Investors were also cautious ahead of a US July employment report later in the day after US data showing weaker-than-expected growth and a rise in the number of Americans applying for jobless benefits, rekindled worries about the health of the world’s largest economy.
“The global economic outlook is deteriorating and corporate earnings are also getting worse -- together they are creating selling pressure,” said Yoku Ihara, manager at investment information department at Retela Crea Securities.
The benchmark Nikkei ended the morning down 295.88 points at 13,080.93. The broader Topix lost 2.4% to 1,271.95.
“The number of companies cutting their profit outlooks is a little bit bigger than I thought,” said Junichi Misawa, executive officer at STB Asset Management.
“Companies had factored in rises in raw materials costs in their outlooks and the question had been to what extent they could pass that on in their selling prices. But in addition to that, a slowdown in demand is emerging, eating into their profits,” he said.
As of Thursday, of 560 firms listed on the Tokyo Stock Exchange’s first section that had announced first-quarter April-June results, and 61 firms or 11% had cut their full-year forecast, data by Shinko Research Institute shows.
NEC tanks
NEC fell to 508 yen, heading for its biggest daily percentage loss in more than 20 years.
It reported a 64% fall in its quarterly operating profit due to slow sales of network equipment and an increase in cellphone development costs. UBS lowered its rating on the stock to “neutral” from “buy” after the earnings.
TDK slid 6% to 6,110 yen, becoming the biggest drag on the Nikkei after posting a 72% fall in group net profit for the three months ended 30 June, and cutting its annual forecast by 15% to 55 billion yen.
Financial shares were also hit after Mizuho Financial Group and Sumitomo Mitsui Financial Group posted sharp declines in first-quarter core profitability, hurt by the global market downturn and a weakening domestic economy.
Mizuho fell 3.6% to 507,000 yen and Sumitomo Mitsui lost 7% to 789,000 yen.
Sharp Corp tumbled 5.2% to 1,428 yen after posting a 14% fall in quarterly profit on Thursday, hit by slower mobile phone sales.
Japan’s corporate earnings season is in full swing, with Nissan Motor and Astellas Pharma among major firms due to announce results later in the day.
Trade picked up, with 941 million shares changing hands, compared with last week’s morning average of 851 million. Declining shares beat advancing ones by nearly six to one.
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First Published: Fri, Aug 01 2008. 09 31 AM IST
More Topics: Markets | Japan | Stocks | Nikkei | Topix |