Most Japanese Stocks Decline on China Easing Concern

Most Japanese stocks declined amid signs rising home prices in China may prompt the government to refrain from easing policy. Declines were limited after the yen fell as consumer confidence in the U.S. topped estimates.

TDK Corp., a manufacturer of electronic parts which gets more than 25 percent of its revenue from China, fell 0.6 percent. Funai Electric Co., an audio-visual equipment company that relies on North America for half its sales, climbed 4.3 percent. Komatsu Ltd. paced declines in its sector after the construction-machinery maker’s equity rating was cut by Bank of America Merrill Lynch.

“The rise in home prices will benefit the wealthy but it may make it harder for the government and central bank to take stimulus measures,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo.

The Topix Index fell 0.2 percent to 764.66 as of the 3 p.m. close in Tokyo, with about three shares dropping for every two that gained. The Nikkei 225 Stock Average rose 0.1 percent to 9,171.16. Volume on the gauge was almost 25 percent below the 30-day average, ahead of European leaders’ talks this week to help defuse the region’s debt crisis.

Shares fell after China’s July housing data showed price gains for new homes, prompting speculation the government will hold off easing policy. Prices climbed from a month earlier in 49 cities out of the 70 the government tracks, the National Bureau of Statistics said on its website on Aug. 18. Policy makers cut rates in June and July after two reductions in banks’ reserve-requirement ratios this year as the economy expanded at the slowest pace since 2009.

TDK slid 0.6 percent to 3,550 yen. Seiko Holdings Corp., a manufacturer of watches and clocks that gets almost a fifth of its revenue from China, sank 1.2 percent to 244 yen.

U.S. Confidence

Futures on the Standard & Poor’s 500 Index were little changed today. The gauge rose 0.2 percent on Aug. 17 after confidence among U.S. consumers unexpectedly improved in August, boosting prospects for household spending this quarter, according to the Thomson Reuters/University of Michigan preliminary index of consumer sentiment.

The Conference Board’s index of U.S. leading economic indicators, a gauge of the outlook for the next three to six months, climbed more than forecast in July.

“The U.S. economy’s rebound from the April-June period is fueling market confidence and is correcting the dollar’s slide against the yen,” said Masaru Hamasaki, Tokyo-based chief strategist at Toyota Asset Management Co., which manages the equivalent of $23 billion. “Currency is making the biggest impact on the Japanese market. Shares are so sensitive to currency movements that even a fall of one or two yen against the dollar has a big impact on corporate earnings.”

Funai Electric

Funai Electric jumped 4.3 percent to 1,107 yen. Kasai Kogyo Co., a car-interior equipment maker that gets more than 35 percent of its sales from North America, gained 1 percent to 399 yen.

Declines in stocks were limited after the yen depreciated to as low as 79.66 against the dollar today in Tokyo, compared with 79.37 at the close of stock trading on Aug. 17, boosting overseas income at Japanese companies when repatriated.

The Topix has fallen 12 percent from this year’s peak on March 27 on concern earnings would be hurt by Europe’s debt crisis and as growth slows in China and the U.S. The decline has cut the price of shares on the gauge to 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.4 for the Europe Stoxx 600 Index. A number less than one means companies can be bought for less than the value of their assets.

In Europe, leaders plan a week of intensive shuttle diplomacy to help defuse the continent’s debt crisis, amid dissension on the European Central Bank’s role and how to help Greece.

Europe Meetings

With the single currency’s continuing crisis threatening the global economy, Jean-Claude Juncker, the Luxembourg premier who heads the group of euro-area finance ministers, is expected in Athens on Aug. 22 to discuss Greek Prime Minister Antonis Samaras’ request of a two-year extension for the country’s fiscal adjustment program.

Don Quijote, a discount retailer, soared 4.9 percent to 2,875 yen after saying it expects a 4 percent rise in operating profit to 30.5 billion yen ($383 million) in the year ending June 30, citing its private brand expansions.

Komatsu fell 1.3 percent to 1,767 yen after the stock’s investment rating was cut to neutral by Merrill Lynch, citing slowing growth in global construction machinery demand and concern about falling resource prices. Hitachi Construction Machinery Co. lost 1.8 percent to 1,483 yen after its equity rating was lowered to underperform by the investment bank.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE