Topix Falls on Fed Tapering Bets; Nitto Denko Slumps

Japan’s Topix index fell for a second day as a U.S. budget accord stoked bets the Federal Reserve could reduce stimulus next week. Nitto Denko Corp. plunged the most on record after cutting its profit forecast.

Honda Motor Co., a carmaker that gets 47 percent of its revenue in North America, dropped 1.2 percent. Nitto Denko, a maker of chemical products, plunged 19 percent as the sector led declines among the 33 Topix industry groups. DeNA Co., an online-gaming network operator, slumped 8.3 percent after its rating was cut at Mitsubishi UFJ Morgan Stanley Securities Co.

The Topix fell 0.7 percent to 1,242.23 at the close in Tokyo with all but four subsectors dropping. The Nikkei 225 Stock Average, which has retreated from an almost six-year high last week, slid 1.1 percent to 15,341.82.

“Global stocks are falling on speculation the Fed may taper sooner than expected following the budget accord,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $48 billion. “Investors are using the speculation to take profit after markets rose to good levels this month.”

Futures on the Standard & Poor’s 500 Index dropped 0.1 percent today. The equity gauge sank 1.1 percent yesterday after agreement on the budget deal. Investors are considering when the Fed, which meets next week, will reduce the pace of monthly bond buying. Fed officials cited the drag from fiscal policy in their Oct. 30 statement and Jeffrey Lacker, president of the Richmond Fed, said in a speech Dec. 9 that budget uncertainty is weighing on business investment decisions.

Budget Accord

Congressional negotiators agreed to a budget deal that would ease automatic spending cuts by about $60 billion over two years and will reduce the deficit by $20 billion to $23 billion. The deal still has to pass the House and Senate.

Companies that do business in the U.S. retreated. Honda lost 1.2 percent to 4,165 yen. Canon Inc., a camera maker that relies on the Americas for 27 percent of its revenue, lost 0.8 percent to 3,275 yen. Komatsu Ltd., a construction-machinery maker that counts the region as its biggest market, declined 1 percent to 2,029 yen.

The Topix (TPX) rose 44 percent this year, the most among 24 major developed markets tracked by Bloomberg, as Prime Minister Shinzo Abe and the Bank of Japan seek to end 15 years of deflation. The Topix traded at 1.26 times book value today, compared with multiples of 2.57 for the S&P 500 and 1.74 for the Stoxx Europe 600 Index yesterday.

Foreign Buying

Buyers from outside Japan pumped 12.9 trillion yen into the nation’s stocks this year through November, Tokyo Stock Exchange data show. The inflows surpassed a record set in 2005, which preceded a 1.9 percent increase for the Topix the following year.

Nitto Denko plunged 19 percent to 4,180 yen, the most since at least 1974, to lead declines on the 1,755-member Topix. The company cut its full-year net income forecast 27 percent to 41 billion yen, missing analysts’ expectations of 58 billion yen. Nitto Denko was downgraded to neutral from buy at Bank of America Corp.’s Merrill Lynch unit.

A Topix gauge tracking chemical makers declined 2.1 percent. Sumitomo Chemical Co. lost 4.8 percent to 397 yen.

DeNA (2432) plunged 8.3 percent to 2,103 yen. The gaming company was downgraded to underperform from neutral at Mitsubishi UFJ Morgan Stanley Securities, which lowered the target price to 1,700 yen from 1,900 yen.

Mixi Inc. slumped 20 percent to 6,060 yen, plunging by its daily limit for a second day. The social-network operator fell yesterday after its rating was cut at Goldman Sachs Group Inc.

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

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

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