Topix Heads for Third-Day Gain on Toyota Profit Forecast

Japan’s Topix Index (TPX) fell for the first time in three days, retreating from the highest level since September 2008, as the yen strengthened and technical indicators signaled the market may be overbought.

Canon Inc., which loses almost $80 million for every 1 yen Japan’s currency gains against the dollar, dropped 1 percent. Sumitomo Heavy Industries Ltd. slumped 11 percent after missing estimates for operating profit. Sharp Corp. (6753) jumped 15 percent after the Yomiuri newspaper reported Samsung Electronics Co. (005930) may provide additional investment to the unprofitable TV maker. Softbank Corp. (9984) rose 5.4 percent after profit doubled at Chinese e-commerce affiliate Alibaba Group Holding Ltd.

The Topix lost 1.1 percent to close at 1,181.83 in Tokyo, capping the biggest drop since April 18, with more than two stocks declining for each that rose. The gauge yesterday climbed to its highest since Sept. 8, 2008, and has risen almost 20 percent in the last five weeks. The Nikkei 225 Stock Average (NKY) dropped 0.7 percent to 14,191.48 today.

“It’s not surprising that shares slipped a bit after big gains,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages about 6 trillion yen ($61 billion). “It’d be odd if they didn’t have a correction.”

The Topix this week recouped losses from the 2008 collapse of Lehman Brothers Holdings Inc. amid optimism new leadership in Japan’s government and central bank will do more to beat deflation and signs the U.S. economy is picking up. The gauge’s 14-day relative strength index, which measures trading momentum, climbed yesterday for a second day above the 70 threshold, indicating to some traders shares have risen too far, too fast. The 25-day Toraku index, which compares the number of advancing and retreating stocks, increased to 135 yesterday, with a reading above 120 suggesting a drop is likely.

The Topix yesterday traded at 1.3 times book value, compared with 2.4 for the Standard & Poor’s 500 Index and 1.7 for the Stoxx Europe 600 Index.

Yen Climbs

Exporters including Canon and Komatsu Ltd. (6301) fell as the yen rose against 14 of its 16 major counterparts. Canon lost 1 percent to 3,470 yen. Komatsu, a construction machinery maker that gets 80 percent of its revenue abroad, dropped 1.6 percent to 2,684 yen after earlier adding as much as 1.6 percent.

Toyota Motor Corp. (7203), which yesterday forecast a 42 percent increase in profit, fell 1.4 percent to 5,760 yen after gaining more than 6 percent in the past two days.

Sumitomo Heavy slumped 11 percent to 409 yen, the biggest drop since August. The maker of heavy machinery said operating profit will be 30 billion yen this fiscal year, compared with analysts’ estimate of 33.4 billion yen.

Inpex Corp. and Resona Holdings Inc. are among more than 300 companies scheduled to post results tomorrow on the busiest day of the earnings season.

Sony Slides

Sony Corp. (6758), Japan’s biggest exporter of consumer electronics, after the close forecast a smaller-than-expected annual profit as it struggles to regain market share from Apple Inc. and Samsung Electronics Co. Net income may rise to 50 billion yen in the year started April 1 from 43 billion yen a year earlier. Sony’s shares slid 1.4 percent to 1,744 yen.

Among advancing stocks, Sharp surged 15 percent to 423 yen, the highest since June, after Yomiuri said Samsung, Asia’s biggest electronics maker, may make an additional investment of “several tens of billions of yen,” making it Sharp’s biggest shareholder. Sharp sold 10.4 billion yen of shares to Samsung in March.

Softbank, Alibaba

Softbank, which owns about a third of Alibaba, gained 5.4 percent to 5,230 yen. Net income at Alibaba jumped to $642.2 million in the quarter ended December from $236.9 million a year earlier, according to a Yahoo Inc. filing to the Securities and Exchange Commission.

The Nikkei Stock Average Volatility Index fell 0.6 percent to 25.61, indicating traders expect a swing of about 7.3 percent on the benchmark gauge during the next 30 days.

Futures on the S&P 500 were little changed today. The measure yesterday extended its record level for a fifth day, as earnings forecasts from Whole Foods Market Inc. and Electronic Arts Inc. beat estimates. The gauge has climbed 3.2 percent in that time, the largest five-day rally since Jan. 7.

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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