By Myra P. Saefong
Japanese shares traded on a mixed note Monday but analysts
expect the nation's stock market to head much lower in the coming
months as strength in the yen continues to put a damper on demand
and dividend payouts.
"The combination of the worse than-expected jobs report from the
U.S. and continued strength of the yen will place heavy pressure on
Japanese stocks," said Tony Sagami, editor of Asia Stock Alert.
"The path of least resistance for the Nikkei 225 is going to be
down -- way down," he said. "This is the time to be a seller."
The benchmark Nikkei 225 Average peaked above 10,700 on Aug. 31,
its strongest intraday level since early October of last year,
according to data from FactSet Research, but the index has since
fallen back below the key 10,000 level. By the end of morning
trading Monday, the index was at 9,736.63, up 0.05%.
"The Nikkei had been up about 45% from the March lows to about
10,500, but definitely was stuck for the last few weeks until
turning down sharply in the last week," said Richard Hastings,
consumer strategist at Global Hunter Securities.
The broader Topix has followed a similar pattern, reaching a
more than 10-month high above 980 in late August only to slip to
871.78 Monday, down 0.3%.
Exporter shares were among the bigger losers amid overall
strength in the yen, with Nikon Corp. down 4.5%, Mazda Motor
(7261.TO) losing 4.6% and Sony Corp. [s: (SNE) down 1.2% in
Tokyo.
U.S. shares fell Friday following news that the nation's economy
shed a worse-than-expected 263,000 jobs in September, putting
pressure on most major Asian markets Monday.
South Korea's Kospi dropped 1.4%, New Zealand's NZSX 50 fell by
0.2% and Taiwan's Taiex edged 0.4% lower. But Hong Kong's Hang Seng
was up 0.2% and Australia's S&P/ASX 200 was up 0.3%. Trading in
China remained closed through Oct. 8 for a local holiday.
Paper weight
Strength in the Japanese yen against the U.S. dollar has weighed
on the export sector in Japan and that's not likely to end anytime
soon, according to some analysts.
"If the JPY [Japanese yen] remains below 90 for much longer,
then the Nikkei could be looking at the 9,250 to 9,500 range very
soon," said Hastings. "If the strong JPY situation is not easily
resolved, and it fails to weaken into the 95 to 100 level soon,
then further declines in the Nikkei are logical."
The U.S. dollar gained some ground Friday against the Japanese
yen though moved lower against most of the high-yielding
currencies, said Kathy Lien, director of currency research at GFT,
in a note to clients.
In recent dealings, one U.S. dollar bought 89.79 yen, up from
89.66 yen late Friday in New York.
"The sharp gains in the yen are starting to show damaging
results," said Lien. "Toyota is holding on for dear life as it
expects to report a second-consecutive annual loss."
Shares of Toyota (TM) were up a modest 0.3% Monday morning but
they're still trading near their lowest level since mid-July.
"Fiscal and low-interest rate policy moves by both Japan and the
U.S. have reduced the downside risks in the economy," Naoki
Kamiyama, a chief strategist at Deutsche Bank, wrote in a research
note Monday.
But "tighter bank regulations and America's evident weak-dollar
policy are not favorable developments for Japanese stocks," he
said.
Given all that, he expects Japan's Topix to see a short-term
correction target of around 850.
"Margins and [earnings-per-share] levels are looking more secure
for FY3/10 [the fiscal year ending in March 2010], but we
anticipate only a modest recovery in sales in FY3/11-3/12," he
said.
Payout pain
Adding to the likelihood of further losses for Japanese shares,
a Nikkei survey showed that dividend payouts for the
April-September fiscal half are set to fall by some 1 trillion yen
($11.1 billion), or 34%, on the year.
The Nikkei survey, which collected data from 1,863 firms,
excluding start ups, showed planned dividend payments at a total of
1.94 trillion yen, compared with 2.93 trillion yen a year
earlier.
The dividend cuts were prevalent among steelmakers, auto
industry firms and electronics manufacturers, the Japanese daily
business newspaper reported Monday.
The larger dividend cuts also came from companies projecting net
losses for the first half, which include Hitachi Ltd. , Toshiba and
Mitsubishi Electric , the newspaper said.
And with more than 20% of stocks in the hands of retail
investors, the decrease in dividends may also continue to hurt
consumer spending, Nikkei said.