Nikkei dips 0.4% to fresh 26-year closing low

Nikkei dips 0.4% to fresh 26-year closing low
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First Published: Tue, Mar 10 2009. 01 46 PM IST
Updated: Tue, Mar 10 2009. 01 46 PM IST
Tokyo: Japan’s Nikkei average dipped 0.4% on Tuesday to a fresh 26-year closing low as drugmakers slid amid worries about their global competitiveness after Merck proposed to take over Schering-Plough.
The Nikkei has lost about a fifth of its value this year as a deepening global recession takes a heavy toll on the export-driven Japanese economy.
But losses were limited on Tuesday as expectations for the government to step into the market in what are often called price keeping operations or PKOs lent support.
Market participants say buying by what they believe to be public pension funds has been supporting the benchmark when it approaches 7,000.
“Hopes that the government will implement powerful PKOs are keeping the Nikkei from breaking below 7,000. If it weren’t for those hopes, it would have gone below that level by now,” said Fumiyuki Nakanishi, manager at SMBC Friend Securities.
“As part of moves to reduce risky assets, investors are shifting funds to cash from equities,” said Nakanishi.
Foreign investors have been heavy sellers of Japanese stocks, in part due to needs to repatriate funds as economic conditions deteriorate in their home markets.
Data last week showed foreigners sold a net ¥156.9 billion ($1.6 billion) of Japanese stocks during the week ended February 28, their thirteenth consecutive week as net sellers.
The benchmark Nikkei .N225 shed 31.05 points in light trade to 7,054.98, a new 26-year closing low and expectations are high that it may soon break below 6,994.90 -a 26-year intraday low hit in October.
Although the market has been creeping towards the key level, technical charts show the Nikkei’s downward momentum is not as strong as when the index fell in October.
“Buying buy pension funds, expectations that the worst is over for manufacturers’ inventory adjustments and signs that economic indicators may be bottoming out are giving a bit of support to the market,” said Takashi Kamiya, chief economist at T&D Asset Management.
The broader Topix declined 1% to 703.50, a new 25-year closing low.
Shares of drugmakers dropped after Merck’s proposed a $41 billion takeover of Schering-Plough.
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First Published: Tue, Mar 10 2009. 01 46 PM IST
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