The FINANCIAL — Tokyo stocks fell on January 31, as unrest in Egypt, combined with a stronger yen and disappointing business forecasts from Fujitsu and Konica Minolta Holdings, helped to erase almost all of this year's gains on the Nikkei 225 Stock Average.
The Nikkei fell 122.42 points, or 1.2%, to 10,237.92 following Monday's 1.1% loss. The Topix index of all the Tokyo Stock Exchange First Section issues also slid 9.61 points, or 1.0%, to 910.08, with 27 of 33 subindexes closing in negative territory.
Trading volume was relatively light through most of the day, but picked up late in the session to total a moderate 1.97 billion shares, according to Nikkei.com.
The major indexes fell abruptly at the open, following a fall in March Nikkei futures in Chicago on Friday, U.S. share weakness and mushrooming political turmoil in Egypt. The yen's gain against the dollar and the euro also helped to weigh on shares.
Earnings releases from Fujitsu and Konica Minolta last Friday afternoon also cast a pall over the market as the pair cut their respective operating profit outlooks for the current fiscal year. Fujitsu, which cut its forecast to Y145 billion from Y185 billion, saw its shares drop 6.2% to Y511 on more than four times normal volume. Shares were also hit by a target price cut to Y670 from Y720 from Nomura Securities.
"We had already assumed that it would be difficult for Fujitsu to reach its target in view of the slow recovery in domestic IT investment, but the shortfall was larger than we had anticipated," write Nomura analyst Masaya Yamasaki in a client report.
Meanwhile, Konica Minolta tumbled 7.8% to Y792 after its Y5.6 billion third quarter operating profit fell well below expectations, while it also cut its current fiscal year target to Y45 billion from the prior Y50 billion mark, "raising structural concerns about the fourth quarter and the upcoming fiscal year," according to Morgan Stanley MUFG Securities analyst Masahiro Ono, who said he expects consensus forecasts to fall for the next fiscal year and beyond.
On an intraday basis, the Nikkei fell below its 2010 closing level of 10,228.82, with exporter shares hit by the firmer yen and concerns about Egypt's stability. TDK lost 2.4% at Y5,390, while Sony surrendered 2.7% at Y2,829.
"If the unrest in Egypt drags on, there is a possibility that falls in global equities will continue," said Okasan Securities strategist Hideyuki Ishiguro. But he added that market attention may shift away from the Middle East if key U.S. economic figures, including jobs data due Friday, beat expectations.
While the sum of Japan's business exposure to Egypt is not great, Nissan Motor's shares nevertheless underperformed the broader market, falling 2.2% to Y830 after it said it is suspending operations at an auto plant in suburban Cairo until Thursday due to the unrest.
As the current earnings reporting season moves into full gear, several other shares reacted to business results, including Fujifilm Holdings, which closed down 3.1% at Y2,965 even after the company revised upward its operating profit outlook for the fiscal year to Y140 billion from an earlier-projected Y120 billion. A chief fund manager at a Japanese asset management firm noted that the upward revision didn't come as a surprise and still fell short of analysts' expectations.
Positive performers included Central Japan Railway, or "JR Central", which added 2.5% at Y692,000, while East Japan Railway, or "JR East", ended up 1.1% at Y5,420. Both companies raised their current fiscal year profit outlooks.
Elpida Memory lost 3.0% at Y1,188 despite a Nikkei report that the company will take over the DRAM operations of Taiwan's Powerchip Technology. Analysts were not sanguine about Elpida's ability to improve its performance by simply joining hands with Taiwanese firms, however. Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, said that investors want to confirm how the realignment efforts will be finalized. Elpida's shares were also ripe for profit-taking after rising 14% last week.
March Nikkei 225 futures closed down 140 points, or 1.4%, at 10,230 on the Osaka Securities Exchange.
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