Japanese Shares Retreat After China Data Misses Estimates

Japan’s Topix index fell, extending yesterday’s biggest drop in five weeks, after Chinese factory production and retail sales missed estimates, spurring concern about the outlook for the world’s second-biggest economy.

“We knew that China’s economy wasn’t going to accelerate but there’s been a lot of bad news recently and the slowdown is intensifying,” said Gentoku Kiyokawa, Tokyo-based head of the Japanese investment management department at BNP Paribas Investment Partners SA. “There’s still concern about the situation in Ukraine, and investor sentiment isn’t good, so the market reacted very sensitively to China’s data miss and sold off shares.”

The Topix (TPX) fell 0.3 percent to 1,203.46 at the close in Tokyo, after dropping 2.1 percent yesterday, the largest decline since Feb. 4. Volume was 31 percent below the 30-day average today. The Nikkei 225 Stock Average lost 0.1 percent to 14,815.98.

China’s factory production increased 8.6 percent in the January-February period from a year earlier, the National Bureau of Statistics said today in Beijing, compared with the 9.5 percent median projection of analysts surveyed by Bloomberg News. Retail sales advanced 11.8 percent, missing expectations for a 13.5 percent gain.

Shippers led losses in Japan. Mitsui OSK Lines Ltd. dropped 2.2 percent after the Baltic Dry Index, a measure of commodity shipping rates, slid the most in eight weeks yesterday. Mitsui High-Tec Inc., which makes precision machine tools, tumbled 7.2 percent after forecasting a decline in profit. EnBio Holdings Inc., which provides soil decontamination services, surged 178 percent today after going untraded on its debut yesterday.

Topix Swings

The Topix swung between gains and losses at least 20 times today, with trading volume the lowest since August. About nine shares fell for every seven that rose on the 1,778-member gauge.

Before the market opened, data from Japan’s cabinet office showed core machine orders for January, an indicator of future capital spending, rose 13.4 percent from the prior month. Economists polled by Bloomberg had expected a 7.1 percent gain.

Labor unions said they clinched their biggest raises in years as Prime Minister Shinzo Abe calls for companies to boost wages to help put the world’s third-largest economy on a path to sustainable growth.

Higher Pay

Based on negotiations across 43 union groups, companies agreed to increase base pay by an average of 1,950 yen ($19) a month in the coming year, the Japanese Trade Union Confederation, known as Rengo, said yesterday in Tokyo. The union group, the nation’s biggest, said the increment was significant enough to rank as the biggest raises won since at least the turn of the century.

Japan Airlines Co. gained 1 percent to 5,130 yen. Deutsche Bank AG reiterated its buy rating and said the carrier’s balance sheet is strong enough to sustain its high return-on-equity trend. Valuations are also attractive given its ROE, analysts led by Joe Liew wrote in a report dated yesterday.

Among others shares that rose, EnBio surged 178 percent to 1,611 yen.

“Domestically, there are a lot of positives, but the overseas environment is bad, so we’re not in a situation where we can go chasing highs,” said Akio Yoshino, chief economist in Tokyo at Amundi Japan Ltd., which oversees the equivalent of $32.1 billion. “The problems in China are serious and tensions continue in Ukraine.”

Ukraine Strife

U.S. President Barack Obama called Russia’s incursion into Crimea a violation of international law and told Ukrainian Prime Minister Arseniy Yatsenyuk that the U.S. stands with Ukraine to protect its sovereignty and territory.

Russian government officials and businessmen are readying for sanctions resembling those applied to Iran after what they see as the inevitable annexation of Ukraine’s Crimea region, according to four people with knowledge of the preparations.

The Topix Marine Transportation Index fell 2.1 percent, the most among the broader gauge’s 33 industry groups. Mitsui OSK sank 2.2 percent to 402 yen. Nippon Yusen K.K., Japan’s biggest shipper by market value, lost 2.6 percent to 304 yen. The Baltic Dry Index (BDIY) dropped 8 percent yesterday for its biggest loss since Jan. 10.

Mitsui High-Tec sank 7.2 percent to 682 yen, the most since June 7. The company forecast a 2 billion yen profit for the year to Jan. 31, 29 percent lower than the previous year.

The Topix retreated 7.6 percent this year after surging 51 percent last year. The gauge traded at 1.18 times book value today, compared with 2.61 for the Standard & Poor’s 500 Index and 1.83 for the Stoxx Europe 600 Index yesterday.

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 editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net Tom Redmond

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