The FINANCIAL — Tokyo stocks fell on August 31 as a stronger yen and losses in other key Asian markets erased earlier gains that had briefly sent the key Nikkei index to an 11-month intraday high after the main Japanese opposition party's landslide victory in Sunday's general election.
The 225-issue Nikkei Stock Average hit its highest intraday level of 10,767.00 since Oct. 6 about 17 minutes into trading as investors celebrated the Democratic Party of Japan's taking power. It then lost ground to end the day down 41.61 points, or 0.40 percent, from Friday to 10,492.53 after a rollercoaster session.
The broader Topix index of all First Section issues on the Tokyo Stock Exchange lost 3.58 points, or 0.37 percent, to 965.73 after also briefly logging an 11-month high.
"The DPJ's resounding win in Sunday's House of Representatives election, which ended the Liberal Democratic Party's half-century of almost uninterrupted rule as the market expected, ''was welcomed as it cleared uncertainty by breaking a deadlock in parliament,'' said Toshikazu Horiuchi, an equities strategist at Cosmo Securities Co," Nikkei report says.
The DPJ-led opposition camp already holds a majority in the less powerful House of Councillors.
But selling soon set in as investors locked in gains after seeing the U.S. dollar rapidly weaken to a seven-week low in the upper 92 yen range, especially hurting automakers and other Japanese exporters who have set their average assumed rate at around the 95 yen line.
''Today the currency market moves clearly took the lead,'' said Tsuyoshi Segawa, a Mizuho Securities Co. equity strategist. ''With the yen appreciating, those who bought stocks in the early morning, especially short-term speculators, did an about-face to sell and immediately sent the market into negative territory.''
Decliners were led by iron and steel, auto, and rubber product issues.
As a weaker dollar erodes overseas profits when they are repatriated to Japan, Honda Motor fell 55 yen, or almost 2 percent, to 2,935 yen, and Canon lost 120 yen, or over 3 percent, to 3,570 yen. Export bellwethers Sony and Toyota Motor both lost over 1 percent.
Sharp declines in Shanghai stocks, down nearly 6 percent as Tokyo trading closed, and stocks in other Asian markets also dampened sentiment, brokers said.
Major gainers included mining, information and communication, and gas and electricity issues.
With DPJ policy seen as favoring consumers, stocks sensitive to domestic demand such as retail and communication issues climbed. Supermarket operator Daiei jumped 9 yen, or over 2 percent, to 413 yen, and furniture discount chain Nitori rose over 2 percent. Mobile phone service provider NTT Docomo was up more than 1 percent.
Investors locked in recent gains in other issues that should benefit from DPJ pledges such as childcare allowances and free highways. Among them, baby gear maker Combi fell 26 yen, or over 3 percent, to 774 yen, and car goods distributor Autobacs Seven lost over 1 percent.
On the First Section, declining issues outnumbered advancing ones 963 to 585, with 137 others remaining unchanged.
Mizuho Financial Group, the day's leader in both value and volume terms, ended unchanged at 228 yen.
While stronger-than-expected July industrial output in the morning and some buybacks in late afternoon trading gave the market's floor some support, many investors are tentative as the focus turns to such issues as the new Cabinet lineup, budget formation, and to what extent the DPJ can deliver on its pledges.
''At least through mid-September, investors will want to monitor the formation of the DPJ-led administration and how its policies are implemented,'' said Hiroichi Nishi, Nikko Cordial Securities Inc. equities division general manager.
Trading volume on the main section came to 2,158.62 million shares, up from Friday's 1,927.15 million.
The TSE's Second Section index was down 10.49 points, or 0.45 percent, to 2,325.53 on a volume of 47.18 million shares. On the Osaka Securities Exchange, the near-term September Nikkei 225 index futures contract was down 80 points to 10,450.
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