Japan’s Topix Index Falls Most in Two Months as Brokerages Drop

Jul 10, 2014 3:02 am ET

July 10 (Bloomberg) -- Japanese shares fell a fourth day, with the Topix index dropping by the most in almost two months, as the yen gained after the nation’s machinery orders unexpectedly plunged and brokerages tumbled.

Nomura Holdings Inc., Japan’s biggest securities company, fell 3.2 percent. Educational-services provider Benesse Holdings Inc. sank 4.9 percent after saying as many as 20 million customer records may have been leaked. ABC-Mart Inc. added 1.1 percent after the footwear retailer reported a gain in first- quarter operating profit. Samantha Thavasa Japan Ltd., a handbag maker, surged 21 percent after raising its net-income forecast.

The Topix slid 0.9 percent to 1,259.25 at the close in Tokyo, the largest decline since May 16. Volume was 6.8 percent lower than the 30-day average. The Nikkei 225 Stock Average decreased 0.6 percent to 15,216.47. The yen rose 0.2 percent to 101.46 per dollar after the release of May machinery-order data, which followed a hike in the consumption tax on April 1.

“The machinery orders could be taken as a reason for concern that the effects of the sales-tax hike were worse than expected,” said Koichi Kurose, chief economist at Resona Bank Ltd. “But they will also give hope that the Bank of Japan and government will take steps to counter the harm to the economy.”

Japan’s machinery orders fell the most on record in May, suggesting companies remain cautious about investing record cash reserves. Core orders, a leading indicator of capital spending, dropped 19.5 percent from April, the Cabinet Office said today in Tokyo. The slide, the biggest in data back to 1987, was larger than forecast by all 23 economists surveyed by Bloomberg News. The median projection was for a 0.7 percent gain.

Brokerages Slump

Nomura slumped 3.2 percent to 676 yen, the most since May 7. Daiwa Securities Group Inc., Japan’s second-biggest brokerage, lost 1.7 percent to 854 yen.

The decline in brokerage shares over the past two days shows “a strong likelihood of a stock market decline,” Barclays Plc analyst Hajime Kitano wrote in a note today.

“When Japan’s bubble burst, the peak in brokerage stocks (April 17, 1987) led the peak in the Topix (Dec. 18, 1989) by two years and eight months. In part because that time period left such a powerful memory, brokerage stocks always seem to be seen as a leading indicator of the broader stock market.”

Benesse slumped 4.9 percent to 4,145 yen, the most since Feb. 4. The source of the leak was not a company employee, spokeswoman Junko Nishizawa said. Kyodo news reported earlier that software developer Justsystems Corp. was responsible. Justsystems tumbled 15 percent to 839 yen.

Earnings Season

ABC-Mart climbed 1.1 percent to 5,340 yen. First-quarter operating profit rose 30 percent year on year to 13.2 billion yen, beating analyst estimates for 11.8 billion yen.

Samantha Thavasa Japan surged 21 percent to 873 yen, the biggest gain on record. The handbag maker boosted its net-income forecast by 41 percent to 1.48 billion yen.

“There isn’t much trading volume,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo. “The view is that domestic earnings will be good, so it’s hard to sell. However, there’s no reason to buy right now either.”

Futures on the Standard & Poor’s 500 Index slid 0.1 percent. The measure climbed 0.5 percent yesterday, rebounding from a two-day selloff, as optimism over corporate earnings and jobs growth in the U.S. outweighed central-bank concern that investors may be becoming complacent about the economic outlook.

The Topix advanced 9.5 percent from a May 21 low, paring its drop for the year to 3.3 percent. The gauge traded at 1.2 times book value today, compared with 2.7 for the S&P 500 and 1.9 for the Stoxx Europe 600 Index yesterday.

--With assistance from Yuko Takeo in Tokyo.