Japan’s Topix Falls to Cap Second Weekly Drop as Yen Holds Gains

May 16, 2014 3:33 am ET

May 16 (Bloomberg) -- Japan’s Topix index fell to cap a second week of declines as the yen held gains after economic data in the U.S. and Europe missed expectations.

All 33 Topix industry groups retreated. Toyota Motor Corp., the world’s biggest carmaker, was the biggest drag on the gauge. Japan Display Inc., a maker of screens for Apple Inc. devices, posted its lowest close since listing after forecasting lower profit. Sumco Corp. surged 6.4 percent after the producer of silicon wafers raised its net-income outlook. Amada Co. soared 16 percent, climbing for a second day after projecting profit that beat estimates and saying it would buy back as much as 10 billion yen ($98 million) of its shares.

The Topix lost 1.6 percent to 1,159.07 at the close in Tokyo, ending the week 0.6 percent lower. The Nikkei 225 Stock Average slid 1.4 percent today to 14,096.59. The yen held at 101.55 per dollar after gaining 0.3 percent yesterday. The Standard & Poor’s 500 Index fell the most in a month yesterday.

“While the yen at this level won’t be a big negative for Japanese company earnings, there aren’t that many other catalysts in the market right now,” said Naoki Fujiwara, the Tokyo-based chief fund manager at Shinkin Asset Management Co. “Still, Japanese shares are cheap right now. From a long-term perspective, it may be a good time to buy.”

Futures on the S&P 500 were little changed today. The measure sank 0.9 percent yesterday as investors continued to sell small-cap shares and Wal-Mart Stores Inc. forecast profit that missed estimates.

Yen Gains

The yen strengthened yesterday as weak data fueled haven demand. Industrial production in the U.S. unexpectedly declined in April, held back by a plunge in utilities as temperatures warmed and a broad-based decrease in manufacturing. Euro-area gross domestic product rose 0.2 percent in the three months through March, half as much as economists forecast.

Toyota, which gets about 75 percent of its revenue abroad, sank 2 percent to 5,522 yen. Nissan Motor Co., which counts north America as its biggest market for sales, lost 2.3 percent to 894 yen. Panasonic Corp., which gets almost half its revenue outside Japan, declined 2.4 percent to 1,061 yen.

More than 650 companies on the Topix post results this week. Of members that reported from April 1 through yesterday and for which Bloomberg had estimates, 55 percent beat analyst expectations for profit.

Earnings Season

Japan Display tumbled 12 percent to 518 yen, its lowest close since listing in March. The company said net income will probably be 26.8 billion yen this fiscal year, compared with the 42.8 billion yen average of analyst estimates compiled by Bloomberg.

Sumco jumped 6.4 percent to 778 yen, the most since April 18. The company raised its net-income forecast to 7.5 billion yen from 4.5 billion yen for the six months ending June 30. CLSA Ltd. lifted its rating on the stock to outperform from underperform.

Amada, which makes machines for cutting metal, soared 16 percent to 963 yen, the biggest increase and highest close since 2008. The company extended yesterday’s 7.6 percent advance after projecting net income of 18 billion yen for the current fiscal year, beating analyst estimates for 16.3 billion. Amada will buy back up to 3.5 percent of its shares, it said. SMBC Nikko Securities Inc. raised the company to outperform from neutral.

The Topix traded at 1.13 times book value today, compared with 2.61 for the S&P 500 and 1.89 for the Stoxx Europe 600 Index yesterday. Volume on the Japanese gauge was 6.6 percent higher than the 30-day average today.

--With assistance from Adam Haigh in Sydney.