Japanese Stocks Decline on Falling Earnings, China Trade

Japanese stocks fell for the first time in five days, paring the Nikkei 225 (NKY) Stock Average’s biggest weekly gain since February, as companies including Trend Micro (4704) Inc. reported lower earnings. Shares extended declines after China’s trade expanded less than economists expected.

Trend Micro sank 9.1 percent after earnings fell at the maker of anti-virus software. Advantest Corp., a manufacturer of memory-chip testers that gets more than 20 percent of its sales in China, slid 1.2 percent. Canon Inc. (7751), a camera maker that depends on Europe for almost a third of revenue, fell 2.4 percent as the euro weakened. DeNA Co. soared 22 percent after the social gaming company’s operating profit beat estimates.

“Investors are selling shares to lock in profit from this week’s gain,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo., which oversees about $6.7 billion. “Earnings at domestic-demand focused companies aren’t bad, but those depending on external demand are being hurt by the yen’s appreciation and European debt problems.”

The Nikkei 225 fell 1 percent to 8,891.44 at the 3 p.m. close, trimming its weekly gain to 3.9 percent. Traders earlier settled the price of August options on the gauge at 8.914.81, also known as the “special quotation.” The broader Topix (TPX) Index lost 0.7 percent to 746.79, with almost three shares dropping for every two that gained.

Shares extended drops after China’s exports rose 1 percent in July from a year earlier, missing estimates for an 8 percent gain, according to analysts surveyed by Bloomberg. Imports increased 4.7 percent, compared with expectations for a 7 percent rise. The trade surplus of $25.15 billion fell short of the $35.1 billion economists projected.

China Expectations

“We could see further weakening in China’s exports, damping the broader economy” said Michiya Tomita, a Hong Kong-based fund manager at Mitsubishi UFJ Asset Management Co., which oversees $65 billion. “Investors will be adjusting their expectations downwards.”

Advantest slid 1.2 percent to 1,068 yen. Juki (6762) Corp., a sewing-machine maker that counts China as its biggest market, slipped 1.8 percent to 111 yen.

Futures on the Standard & Poor’s 500 Index (SPXL1) slid 0.3 percent today. The gauge rose less than 0.1 percent yesterday after jobless claims unexpectedly dropped by 6,000 to 361,000 in the week ended Aug. 4. The median forecast of 43 economists surveyed by Bloomberg News called for an increase to 370,000.

The Topix has fallen 14 percent from this year’s peak on March 27 as growth slows in the U.S. and China and on concern Europe’s debt crisis is spreading. The price of shares on the gauge stood at 0.7 times book value, compared with 2.2 times for the S&P 500 and 1.5 times for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than value of their assets.

Earnings Season

A third of the Topix’s 1,672 companies are scheduled to release earnings this week. Of the 316 companies that have reported since July 1 that have issued forecasts, 52 percent have missed expectations, according to Bloomberg data.

Trend Micro tumbled 9.1 percent to 2,200 yen, the most on the Nikkei 225, after operating profit fell 20 percent to 10.5 billion yen ($134 million) in the six months ended June 30, hurt by falling sales from the Americas and Europe.

Exporters to Europe slid after the shared currency fell to as low as 96.33 yen last night in Tokyo, compared with 97.11 at the close of stock trading yesterday. A weaker euro cuts the value of some income for Japan’s exporters.

“Investors won’t become bullish until the currency market settles down,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo.

Canon Drops

Canon fell 2.4 percent to 2,658 yen. Hello Kitty creator Sanrio Co., which gets almost a fifth of its sales from Europe, slid 1.1 percent to 2,513 yen. Shimano Inc., a bicycle parts manufacturer that gets 36 percent of its sales in the region, sank 2.1 percent to 5,550 yen after its equity rating was cut to neutral from neutral plus at Iwai Cosmo Securities Co.

DeNA, which generates all of its revenue in Japan, soared 22 percent to 2,210 yen, the most on record, after posting first-quarter operating profit of 18.4 billion yen yesterday, beating the 17.6 billion-yen estimate compiled by Bloomberg. Earnings rose as users spent more money playing the company’s social network games.

-- With assistance from Toshiro Hasegawa in Tokyo and Jonathan Burgos in Singapore. Editor: Jim Powell

To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.