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Topix Slumps Most in Seven Weeks as Yen Extends Gains

By Yoshiaki Nohara
May 07, 2014 2:46 AM EDT

Japanese stocks fell, with the Topix (TPX) index capping the steepest slump in more than seven weeks, as the yen extended gains against the dollar and the market reopened following a two-day holiday.

Honda Motor Co., a carmaker that gets 46 percent of its revenue in North America, lost 2.9 percent. SoftBank Corp. (9984), the biggest investor in Alibaba Group Holding Ltd., slumped 5.1 percent after BGC Partners said the stock had already priced in much of the good news from the Chinese e-commerce company’s initial public offering. Foster Electric Co., a maker of electric products, plunged 13 percent after its profit forecast missed estimates.

The Topix lost 2.6 percent to 1,152.01 as the close in Tokyo, the biggest drop since March 14, as all 33 industry groups slid. The Nikkei 225 Stock Average fell 2.9 percent to 14,033.45. The yen reached the strongest level since April 14 against the dollar. The U.S. threatened more sanctions against Russia as that country called on Ukraine to postpone its May 25 presidential vote amid violence.

“The market is being sold due to the Ukraine situation that has helped to strengthen the yen,” said Masaru Hamasaki, a Tokyo-based senior strategist at Sumitomo Mitsui Asset Management Co. “There won’t be a clear solution in the near term. The market is nervous about day-to-day developments over there.”

U.S. Futures

Futures on the Standard & Poor’s 500 Index lost 0.1 percent today. The equity measure slumped 0.9 percent yesterday as Twitter Inc. led a selloff in Internet shares while American International Group Inc. dragged down financial companies.

Japan’s Topix fell 12 percent this year, the most among major developed markets tracked by Bloomberg, as investors weighed whether Prime Minister Shinzo Abe and the central bank will succeed in fostering a sustained economic recovery.

Most members of the Bank of Japan agreed to keep easing monetary policy until inflation stabilizes at 2 percent, according to minutes of central bank’s April policy meeting released today.

Exporters fell, with Honda losing 2.9 percent to 3,371 yen. Panasonic Corp., which gets 15 percent of its revenue in the Americas, dropped 3.4 percent to 1,080 yen.

SoftBank tumbled 5.1 percent to 7,420 yen and Yahoo Japan Corp., another shareholder of Alibaba, declined 3.6 percent to 451 yen. Alibaba filed yesterday for what could become the largest U.S. initial public offering ever.

SoftBank, Yahoo

“We strongly believe that much of the good news in regards to the Alibaba IPO has been baked well into SoftBank’s share price,” Amir Anvarzadeh, a manager of Japanese equity sales at BGC Partners in Singapore, said in an e-mail. “Moreover, we also expect U.S. investors to divest from SoftBank and Yahoo as most will want direct exposure to Alibaba without the telecom businesses, which are facing pricing pressure.”

About 540 companies on the Topix are scheduled to report earnings this week, according to data compiled by Bloomberg. Of the companies on the Topix that have posted quarterly results since April 1 and for which Bloomberg had estimates, 60 percent beat earnings expectations.

Foster Electric slumped 13 percent to 1,204 yen, the biggest loss since March 2011, after saying full-year net income will be 2.5 billion yen ($25 million), compared with the 4.53 billion yen estimated by analysts.

Paper companies fell the most among the Topix industry groups. Tomoegawa Co. plummeted 6.2 percent to 183 yen and Hokuetsu Kishu Paper Co. lost 5.1 percent to 469 yen.

The Topix traded at 1.13 times book value today, compared with 2.61 for the S&P 500 and 1.88 for the Stoxx Europe 600 Index yesterday. Trading volume on the Topix was 3.4 percent above the 30-day average.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net Jim Powell

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