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Most Japan Stocks Decline as Real-Estate Companies, Fishing Shares Drop

Most Japanese stocks fell after real-estate companies declined on concerns the March 11 temblor may hurt earnings and agriculture shares dropped as Tokyo Electric Power Co. failed to stop a radioactive water leak.

Mitsubishi Estate Co., the country’s biggest developer by market value, lost 2.5 percent after Credit Suisse Group AG lowered its rating on Japan’s real-estate industry to “market weight” from “overweight.” Maruha Nichiro Holdings Inc. (1334), which sells seafood, declined 1.7 percent as Tokyo Electric Power said radioactive water may be flowing into the sea through a different crack in a damaged reactor than initially thought.

The Nikkei 225 Stock Average pared earlier gains to close 0.1 percent higher at 9,718.89 at the finish of stock trading in Tokyo, with about three shares falling for every two that rose. The gauge is down 5.2 percent since March 11, the day Japan was hit by a magnitude-9 earthquake and tsunami. The Nikkei slumped as much as 16 percent in the two days following the temblor. The broader Topix index fell 0.3 percent to 859.75 today, with almost double the number of share falling for each that gained.

“The damage from the earthquake and tsunami is deep,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $104 billion. “As well as it being hard to see the future of company earnings, investors are becoming more wary of buying shares on concerns the nuclear accident will slow the recovery.”

U.S. Employment

Futures on the Standard & Poor’s 500 Index were little changed today. The index rose 0.5 percent on April 1, adding to gains from the market’s biggest first-quarter rally since 1998, as faster-than-forecast U.S. jobs growth bolstered optimism and Nasdaq OMX Group Inc. started a bidding war for NYSE Euronext.

A gauge of real-estate shares declined 2.4 percent today, posting the biggest drop among the Topix index’s industry groups. Mitsubishi Estate sank 2.5 percent to 1,395 yen. Mitsui Fudosan Co., Japan’s the second-largest developer, slid 1.9 percent to 1,381 yen. Sumitomo Realty & Development Co., the No. 3, declined 3.4 percent to 1,633 yen.

Masahiro Mochizuki, an analyst at Credit Suisse, reduced his rating on the sector, citing concerns that the earthquake and tsunami will have an impact on the profits of developers.

“Share prices could weaken further as the deterioration in earnings becomes apparent,” Mochizuki wrote in a report dated April 1. “Companies are scheduled to release results for the year ended March 2011 in late April or early May and investors should note the possibility that guidance for the new fiscal year could have a negative impact on share prices.”

Tokyo Electric’s Drop

The Nikkei 225 declined 12 percent in the Japanese fiscal year that finished March 31, and dropped 4.6 percent last quarter. Among the Topix’s industry groups, utility companies including Tokyo Electric Power tumbled the most last fiscal year, followed by brokerages, while oil refiners led gains. Nikkei shares trade at an average 14.6 times estimated profit, compared with about 18 times at the beginning of the year.

Tokyo Electric Power, also known as Tepco, has plunged 79 percent since March 11. The utility, the operator of nuclear power plants, is battling to stop radiation leaks of a crippled nuclear plant in Fukushima prefecture following the earthquake and tsunami that knocked out the plant’s cooling systems, resulting in a partial meltdown of some of its reactors. The earthquake and tsunami, which destroyed cities and towns north of Tokyo, has left 27,653 people dead and missing.

Radioactive Water

Agricultural shares, which include fishing processors and distributors, declined today as Tepco failed to stop radioactive water from leaking into the sea.

Maruha Nichiro dropped 1.7 percent to 118 yen, its second day of declines. The shares have plunged 20 percent since March 11. Nippon Suisan Kaisha Ltd. (1332), which fishes and produces seafood products, slid 2.2 percent to 223 yen. Kyokuyo Co., which sells seafood and salted fish, lost 1.7 percent to 170 yen.

Tepco plans to build a silt barrier in the sea to stop the leak of radioactive water from its crippled nuclear station, after failing to clog a crack with a mix of sawdust, newspaper and plastic. The company also said that no change had been seen in the flow of radioactive water from a cracked pit near the No. 2 reactor of its Fukushima Dai-Ichi nuclear plant, and that water may be flowing into the sea through another route. Tepco shares lost 1.6 percent to 442 yen today.

The Bank of Japan’s Tankan survey also showed Japan’s large manufacturers expect business confidence to slump in coming months. The quarterly outlook index of sentiment among big manufacturers is seen falling to minus 2 in June from 6 in March, the lowest reading in a year, the BOJ said today.

Hard to Trade

“Investors need to see what companies plan for their earnings going forward. Until then, it’s hard for investors to trade.” said Ryuta Otsuka, a strategist in Tokyo at Toyo Securities Co.

Among other stocks that advanced, Fast Retailing Co., Asia’s No. 1 clothing chain, jumped 3.4 percent to 11,050 yen, the biggest single positive influence on the Nikkei 225. (NKY) The company’s investment rating was boosted to “outperform” from “neutral” by Credit Suisse.

Oki Electric Industry Co., a maker of communications equipment, jumped 4.6 percent to 69 yen, posting the second- biggest gain on the Nikkei 225. The stock was raised to “neutral” from “sell” by Goldman Sachs Group Inc.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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