Japan's Topix Falls for Seventh Day on Fed Outlook; Honda Leads Decline

Most Japanese stocks fell, dragging the Topix index to its seventh consecutive decline, as the yen traded near a 15-year high before this week’s meetings of the U.S. Federal Reserve and Bank of Japan.

Honda Motor Co., Japan’s second-largest carmaker, declined 2.3 percent. Advantest Corp., the world’s biggest maker of memory-chip testers, sank 1.3 percent. Sumitomo Chemical Co. and Fujikura Ltd., a cable maker, dropped at least 4 percent after reporting earnings that missed their forecasts. Mitsubishi Chemical Holdings Corp. and Yokohama Rubber Co. rose at least 2.5 percent after the companies increased their profit forecasts.

The Topix index fell less than 0.1 percent to 803.12 in Tokyo, its lowest close since April 2009. Almost twice as many stocks declined as advanced. The Nikkei 225 Stock Average gained 0.1 percent to 9,159.98 after retreating as much as 0.3 percent.

“People don’t know whether the yen’s trend will change or not, so they cannot price in strong earnings,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $104 billion. “There is no clear consensus on how the Fed will set monetary policies.”

The Bank of Japan said last week that policy makers advanced their next session to Nov. 4-5, following a meeting by the U.S. Federal Reserve on Nov. 2-3. Japanese markets are closed tomorrow for a public holiday.

‘Selective Buying’

“Investors will refrain from active trading and there’ll be selective buying,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co.

The Nikkei 225 has decreased 13 percent this year, the most among the world’s 40 largest equity markets. Shares in the gauge trade at 16.2 times estimated earnings on average, the lowest level in a month.

Honda Motor sank 2.3 percent to 2,725 yen, the heaviest drag on the Topix and the Nikkei. Mazda Motor Corp., Japan’s second-largest car exporter, dropped 1 percent to 202 yen. Advantest lost 1.3 percent to 1,474 yen, the lowest close since April 2009. Sony Corp., an electronics maker that derives about 70 percent of its revenue abroad, fell 0.9 percent to 2,627 yen.

The yen traded at 80.60 against the dollar at 3 p.m. in Tokyo and appreciated to 80.22 yesterday, the highest level since 1995. The yen is on course for its strongest annual average level since currencies began trading freely in 1971, according to data compiled by Bloomberg and based on each day’s closing price. A stronger yen reduces the value of companies’ overseas revenue when converted to their home currency.

Fujikura Plunges

More than five companies have exceeded profit estimates for every four that have fallen short, based on Bloomberg data compiled from about 630 companies that have reported quarterly results since Oct. 7. About 360 companies out of more than 1,650 in the Topix are scheduled to announce earnings this week, according to data compiled by Bloomberg.

Fujikura plummeted 11 percent to 330 yen, the biggest drop in the Nikkei 225. The cable maker said operating profit in the April-September period fell 16 percent to 7.72 billion yen ($95.8 million), lower than the company’s target of 8 billion yen. Fujikura had its rating reduced to “neutral” from “buy” at UBS AG.

Sumitomo Chemical tumbled 4.1 percent to 332 yen, the lowest since Nov. 27. The company said its first-half net income fell short of its forecast and reduced its full-year outlook by 78 percent to 10 billion yen, citing the yen’s appreciation and goodwill depreciation.

Elpida’s Profit Drops

Elpida Memory Inc., the world’s third-biggest maker of computer-memory chips, slumped 5.1 percent to 764 yen, a level not seen since April 2009. The company said in a preliminary earnings statement it had second-quarter net income of 8.8 billion yen. That was less than its first-quarter profit of 30.7 billion yen. Mitsubishi UFJ Morgan Stanley Securities Co. and Goldman Sachs Group Inc. lowered their share-price estimates on the company.

“The shortfall in second-quarter earnings raises the possibility of earnings missing the consensus estimate,” for the full year, Takeo Miyamoto, an analyst at Deutsche Bank AG, wrote in a report dated yesterday. “Investors need to watch developments” of dynamic-random-access-memory prices, according to Miyamoto, who rates Elpida “sell.”

The Nikkei fluctuated between a gain of 0.2 percent and a drop of 0.3 percent today. The gauge moved within a range of 48.41 points, the narrowest since March 10.

Stocks Fluctuate

“We’ve had strong earnings reports but many are not yet priced in, especially small-to-midsize companies that are not covered by analysts,” SMBC’s Nakanishi said.

Mitsubishi Chemical climbed 4.1 percent to 428 yen, the second-biggest gain in the Nikkei 225. The company boosted its full-year net income forecast 83 percent to 75 billion yen, citing an increase in revenue from its pharmaceutical business. It also boosted the planned year-end dividend to 5 yen from 4 yen a share.

Yokohama Rubber rallied 2.5 percent to 403 yen, the most in almost two months. The company boosted its full-year net income forecast 44 percent to 11.5 billion yen, citing cost cuts.

Brokerages advanced the most among the Topix’s 33 industry groups today, rebounding from a 9.2 percent decline from Oct. 26 to Nov. 1, as earnings slumped at Nomura Holdings Inc. and Daiwa Securities Group Inc. and on concern about declines in securities transaction fees amid shrinking trading volume. Nomura jumped 4.3 percent to 414 yen while Daiwa climbed 1.6 percent to 327 yen. Nomura was the most actively traded stock by value today.

To contact the reporter for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

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