* Nikkei drops 1.7 pct; Topix down 1.4 pct
* PC-related firms suffer on concerns about weak outlook
* Tokyo Electron rises after Q2 orders beat expectations
By Dominic Lau
TOKYO, Oct 10 (Reuters) – Japan’s Nikkei average fell to a
two-month low on Wednesday on concerns that upcoming corporate
earnings for the latest quarter would be hurt by sluggish global
growth, as the IMF cut its forecasts for the second time since
April.
SmartEstimates from Thomson Reuters StarMine expects average
negative earnings surprises of 1.2 percent for the
July-September quarter’s results.
By the midday break, the Nikkei shed 1.7 percent to
8,621.06 after falling 1.1 percent on Tuesday.
“We have seen a lot of shorts being put out today,” a senior
dealer at a foreign bank said.
Automakers came under pressure after they confirmed sharp
declines in September sales in China after a territorial row
between China and Japan sparked boycotts, raising concerns about
their future in the world’s biggest auto market.
Toyota Motor Corp and Honda Motor Co
dropped 1.8 and 1.2 percent, respectively, while auto parts
makers also suffered, with Denso Corp, Toyoda Gosei
and Exedy Corp down between 3.1 and 3.4
percent.
Shun Maruyama, chief Japan equity strategist at BNP Paribas,
said the Nikkei could test 8,500 as short selling by investors
were likely to continue in the next one to two weeks.
“Current short selling pressure comes from hedging against
the forthcoming results season,” Maruyama said.
He said the short-selling ratio on the Nikkei stood at 26
percent on a five-day moving average, below the 28 to 30 percent
level when short-covering tends to emerge.
“Eight thousand five hundred is the supporting line for many
kinds of options and futures trading. Many investors have 8,500
put options. If the price breaks down below 8,500, … maybe the
market could go down to 8,200, 8,300.”
Companies with significant exposure to the PC market came
under pressure after Intel Corp, the world’s largest
semiconductor maker, dropped 2.7 percent following negative
reports by at least two brokerages, citing weak demand for
notebooks.
A weaker-than-expected third-quarter revenue estimate by
U.S. chipmaker Intersil Corp also weighed on the
sector.
Ibiden Co Ltd, Shinko Electric Industries Co Ltd
, Nidec Corp and TDK Corp were down
between 1.9 and 4.4 percent.
TOKYO ELECTRON SURPRISE
But Tokyo Electron Ltd advanced 1.5 percent after
its second quarter orders came in at 75 billion yen ($959
million), above market expectations of between 50 and 60 billion
yen, traders said.
The broader Topix index dropped 1.4 percent to
717.64 in relatively active trade, hitting 52 percent of its
full daily average for the past 90 days.
According to Thomson Reuters I/B/E/S, Japanese companies are
forecast to post an average 57 percent year-on-year rise in
earnings in 2012, down from an earlier estimate of 73 percent
four months ago. Japanese firms posted a 23 percent year-on-year
decline last year, when the country was hit by a massive
earthquake and tsunami and suffered the effects of a nuclear
meltdown and fallout.
The benchmark Nikkei is up 2 percent so far this year,
trailing a 14.6 percent rise in the S&P; 500 and a 10.5
percent gain in the pan-European STOXX Europe 600
index.
But Japanese shares are slightly more expensive than their
European peers, with a 12-month forward price-to-earnings ratio
of 11.4 versus STOXX Europe 600’s 11.1, data from Thomson
Reuters Datastream showed. The S&P; 500’s 12-month forward P/E
stands at 12.8.
