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Japanese Shares Drop to Two-Month Low Amid Syria Tension

Aug. 28 (Bloomberg) -- Japanese shares declined, with the Topix index closing at its lowest in two months, as the yen held gains against the dollar amid heightened concern the U.S. may take military action against Syria.

Yokogawa Electric Corp., which got about 32 billion yen ($329 million) in sales from the Middle East last fiscal year, slumped 3.9 percent. Carmakers were the biggest drag on the Topix after the yen advanced the most in 2 1/2 months against the dollar yesterday. Oil explorers were the only group on the gauge to rise after crude prices climbed to the highest in two years on concerns about supply disruptions.

The Topix lost 1.8 percent to 1,114.03 in Tokyo, closing at its lowest since June 27, with 1,543 shares falling on the 1,706-member index. The TSE Mothers Index of smaller companies tumbled 5 percent to 644.07. The Nikkei 225 Stock Average sank 1.5 percent to 13,338.46.

“There are concerns demand for Japanese shares will deteriorate as a large proportion of investors here are foreign and they’re reducing risk,” said Seiichiro Iwamoto, who helps oversee the equivalent of $33 billion at Mizuho Asset Management Co. “Still, Japan hasn’t fallen as much as I’d feared and to be honest I’m quite relieved. I’d use this as a chance to buy.”

Futures on the Standard & Poor’s 500 Index climbed 0.2 percent. The measure fell 1.6 percent yesterday, the most since June 20, amid concern that military strikes may be taken against Syria for using chemical weapons. The U.S., France and the U.K. are laying the legal groundwork to justify action, moving forces into place and gathering allies in the region. U.K. Prime Minister David Cameron said no decision has been made on what course to take.

Crude Climbs

West Texas Intermediate crude advanced as much as 3 percent today to its highest intraday level since May 2011 before paring gains. It climbed 2.9 percent yesterday.

The yen touched 96.82 against the dollar today as demand for haven assets rose, before trimming its advance to 97.32. Japan’s currency climbed as much as 1.5 percent yesterday, posting its biggest gain on a closing-price basis since June 11.

Yokogawa Electric, which makes industrial measuring and control equipment, lost 3.9 percent to 1,248 yen. Fujitsu General Ltd., an air-conditioner manufacturer that counts the Middle East and Africa as its No. 1 market for sales outside Japan, dropped 2.9 percent to 1,078 yen, paring a decline of as much as 8.4 percent.

Carmakers Drop

Toyota Motor Corp., Asia’s largest carmaker, slipped 2.3 percent to 6,020 yen, the biggest drag on the Topix. Honda Motor Co., which gets 83 percent of sales abroad, slid 2.4 percent to 3,610 yen.

Suzuki Motor Corp. fell the most on the Nikkei 225, slumping 5.4 percent to 2,059 yen. The chairman of local unit Maruti Suzuki India Ltd., the country’s biggest carmaker, said it will delay a plan to build a factory in Gujarat because of slowing sales and weak economic growth. India’s rupee plummeted the most in two decades today as surging oil prices pushed the economy toward its biggest crisis since 1991.

“The market’s move to reduce risk is spreading,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-biggest lender by market value. The unexpected macro pressure of Syria is “adding to pressure on the market as a whole.”

Among stocks that rose, GS Yuasa Corp. jumped the most on the Nikkei 225, climbing 6 percent to 481 yen, after Citigroup Inc. raised its investment rating on the battery maker.

Volume remains low in Japanese equity markets amid the summer-vacation season. Fewer than 2 billion shares traded hands on the first section of the Tokyo Stock Exchange today, compared with the 3.4 billion average for 2013.

The Topix traded at 1.16 times book value today, compared with 2.43 for the S&P 500 and 1.71 for the Stoxx Europe 600 Index yesterday. The Japanese gauge’s 30-day historic volatility was at 26.64 today, compared with its five-year median of 19.42.

To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

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

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