Japanese Stocks Fall as Drug Shares Slump After Valeant Plunge

  • Topix index retreats from seven-week high on low volume
  • IHI slumps most since March 2011 after cutting profit forecast

Japanese stocks fell, with the Topix index slipping from a seven-week high on muted volume, as pharmaceutical shares led declines.

Kaken Pharmaceutical Co. tumbled 9.7 percent, leading losses among drugmakers after a short-seller report on Valeant Pharmaceuticals International Inc. roiled U.S. health-care stocks. Heavy machinery maker IHI Corp. slumped 11 percent after cutting its profit target. Software infrastructure service provider Obic Co. jumped 7.4 percent after saying first half net income rose 41 percent.

The Topix slid 0.6 percent to 1,518.22 at the close of trading in Tokyo, swinging from a gain of 0.6 percent. Volume was about 19 percent below the 30-day average. The gauge closed Wednesday at the highest since Aug. 31 as speculation grew that the Bank of Japan will boost monetary easing after weaker-than-expected trade data. The Nikkei 225 Stock Average fell 0.6 percent to 18,435.87 on Thursday, and the yen traded at 119.70 per dollar after weakening for five days.

“We’re heading into earnings season and with the BOJ policy meeting next week, it’s hard to choose a direction to invest in,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo. “Speculation for central bank easing is supporting the market. Drugmakers are being sold-off as investors try to limit their exposure in the sector.”

U.S. Futures

E-mini futures on the Standard & Poor’s 500 Index added 0.3 percent after the underlying gauge slipped 0.6 percent on Wednesday. Valeant slumped 19 percent, trimming an earlier 40 percent plunge, after the drugmaker refuted a claim by a stock-commentary site run by a short seller that accused the company of an Enron-like strategy of recording fake sales by using phony customers.

The Topix Pharmaceutical Index lost 1.9 percent, leading declines among the 33 industry groups. Kaken Pharmaceutical, a partner of Valeant, tumbled 9.7 percent. Kaken’s tie-up with Valeant as licensor for the antifungal efinaconazole is impacting its shares, and uncertainty remains on the sales effect for Kaken, SMBC Friend Research Center analyst Satoshi Takaoki said.

Stocks around the world have rallied in October, restoring more than $4 trillion to the value of the global equity market, amid growing confidence the U.S. won’t raise interest rates this year. That came after last quarter’s volatility triggered by China’s surprise decision in August to devalue the yuan. The Topix index is up 7.6 percent in October, putting it on course for its biggest monthly gain since February.

Take Profit

“Investors may want to take profit today,” Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo, said by phone. “They couldn’t do that yesterday as stocks rose more than expected.”

IHI lost 11 percent, the most since March 2011, after cutting its forecast for annual profit by about 54 percent to 18 billion yen ($150 million). The company also reduced its operating profit forecast to 50 billion yen, missing analysts estimates for 74 billion yen.

Obic jumped 7.4 percent. Profit rose 41 percent to 13.3 billion yen in the six months through Sept. 30, beating the company’s forecast for 10.1 billion yen.

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