Nikkei average falls for third session

Japan's Nikkei average declined for a third straight session today, hit by a slide in Mitsubishi Electric shares after the government suspended dealings with the firm.

But investors remained hopeful that Greece and its private creditors would be able to clinch a long-awaited debt swap deal this week and avoid a chaotic default.

Mitsubishi Electric Corp shed 14.8 per cent and topped the main board as the heaviest traded share by turnover after Japan's Defence Ministry suspended dealings with the heavy electric machinery maker, saying it had overcharged for its services.

The stock was approaching "oversold" territory, with its 14-day relative strength index at 33.

"Earnings results for major exporters and high-tech firms were obviously hit by Thai floods and their forecast cuts were inevitable and expected, but Mitsubishi Electric's drop was an extra drag on the market today," said Fujio Ando, senior managing director at Chibagin Asset Management.

The benchmark Nikkei fell 0.5 per cent to 8,793.05 in its third straight session of losses after hitting a three-month high last week. Some market participants said last week's rally was spurred by month-end window dressing by domestic institutional investors.

The benchmark is up 4 per cent this month, heading for its best January performance since 1999.

The broader Topix slipped 0.5 per cent to 757.01, while reports over the weekend pointed to a debt swap deal between Greece and its private creditors this week, a crucial precursor for sealing a new bailout for the debt-ridden country.

Trading volume slipped, with 1.65 billion shares changing hands on the main board, down from 1.94 billion shares on Friday.

Despite slide in Mitsubishi Electric shares, Mr Ando said the government's move would have a limited impact on the company. "The suspension may last for six months and they might get a fine but keep in mind that the company is a 3 trillion yen (€29.7 billion) annum company so the impact is limited," he said.

Bucking the trend was Advantest, a major manufacturer of chip testers, which jumped 12.4 pct after forecasting a small annual profit of 1 billion yen, which some analysts called a significant surprise.

Japan's non-life insurers also outperformed, with NKSJ Holdings surging 7.4 per cent as analysts said they did not expect further hefty losses from Thai floods. The company raised its estimated net losses for the year ending March to 100 billion yen from a previous estimate of 12 billion yen.

Peers Tokio Marine Holdings Inc advanced 2.6 per cent and T&D Holdings Inc rose 1.8 per cent.

Japan's earnings season has picked up steam with megabank Sumiomo Mitsui Financial Group and major exporter Canon reporting after the close, and Toshiba and Honda posting results tomorrow.

But Nippon Electric Glass dropped 10 per cent to a two-month low after it reported a 53 per cent year-on-year drop in net profit for the nine months ended December.

In response, Nomura lowered its full-year earnings forecast by 23 per cent and its target price by 15.5 per cent to 710 yen.

Corporate results have so far disappointed investors, with 61 per cent of the 18 Nikkei companies that reported quarterly figures failed to meet market expectations, data from Thomson Reuters StarMine showed. That compared with 36 per cent for S&P 500 companies.

Yen strength and the Thai floods are affecting companies across the board resulting in delays in orders for goods and services.

"We are seeing a slowdown. It's not as if it's a complete meltdown," said a sales trader at a foreign brokerage said. "You just have to expect earnings wouldn't be so great this quarter. The market will start to look through it."

Reuters