Japan Stocks Fall From Six-Month High on Speculation Shares Rose Too Fast

Japanese stocks dropped, with the Nikkei 225 Stock Average (NKY) retreating from a six-month high, on speculation the market had advanced too quickly even after European leaders agreed to a second Greek bailout.

JFE Holdings Inc. (5411) led steelmakers lower after jumping 8.4 percent yesterday. Nintendo Co. (7974), a maker of video-game consoles that gets 34 percent of its sales in Europe, slid 1.6 percent. Mazda Motor Corp. (7261), Japan’s least profitable major automaker, slumped 9.9 percent on a report it plans to raise capital. Airlines and shipping stocks fell as oil traded near a nine- month high.

The Nikkei 225 Stock Average fell 0.2 percent to 9,463.02 at the 3 p.m. close of trading in Tokyo, while the broader Topix Index lost 0.3 percent to 816.29. The benchmark Nikkei 225 has gained 4.5 percent since Feb. 14, when the Bank of Japan surprised investors by expanding its bond purchases to support the economy.

“There’s consensus that Greece is in a tough situation and its outlook is gloomy,” said Takeru Ogihara, chief strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s third- largest lender by market value. “The markets had priced in the bailout agreement to a degree, and we are seeing profit-taking after the event.”

The 14-day relative strength index for the Nikkei 225 was 77 today, above the 70 threshold that some traders see as a sign of overheating. The 25-day Toraku index, which compares the number of stocks that have advanced with those that declined on the Tokyo Stock Exchange, rose to 136 yesterday. Investors view a reading above 120 as a sign shares may fall.

‘Overheated’

JFE Holdings slid 1.9 percent to 1,679 yen after jumping yesterday, when steel and iron makers rose the most among the Topix’s 33 industry groups after Credit Suisse Group AG raised stock price estimates in the sector.

The Topix has gained 12 percent this year as U.S. economic data boosted confidence the world’s largest economy is recovering and as Europe takes concrete steps to contain its debt crisis. The Topix’s rise has increased the value of stocks on the gauge to 1 times estimated book value, up from 0.8 in November.

“The market is overheated and it will take a few days before it cools down,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co. in Tokyo. “Investors won’t chase higher prices aggressively until that happens.”

Futures on the Standard & Poor’s 500 Index (SPXL1) rose 0.5 percent today after U.S. markets were closed yesterday for a holiday.

Greek Bailout

Euro-area finance ministers today reached agreement on a second bailout package for Greece that is vital to staving off a default in March. The deal includes a 53.5 percent writedown for private investors in Greek bonds, Luxembourg Prime Minister Jean-Claude Juncker told reporters today.

Nintendo lost 1.6 percent to 11,460 yen. Kyocera Corp. (6971), an electronics maker that gets almost 17 percent of its revenue in Europe, fell 0.7 percent to 7,010 yen.

Mazda slumped 9.9 percent to 145 yen after NHK Television reported the automaker is preparing to raise as much as 100 billion yen ($1.25 billion) in capital as it braces for a loss of the same amount. The company said in a filing no decision had been made on a share sale.

The Nikkei 225 Volatility Index (VNKY) fell 8.8 percent to 21.63, indicating traders expect a swing of about 6.2 percent on the benchmark gauge over the next 30 days. Trading volume on the Nikkei 225 was 50 percent above the 100-day average.

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

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

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