Nikkei 225 Falls From 22-Month High on Overheating Signs

Japanese shares fell, with the Nikkei 225 Stock Average retreating after reaching a 22-month high on Jan. 4 on speculation the market is overbought. Shares rose earlier after U.S. payrolls increased.

Nomura Holdings Inc., Japan’s biggest brokerage by market value, dropped 5 percent, halting a record winning streak on speculation the stock may be overheating. Aozora Bank Ltd. slumped 10 percent on a report that Cerberus Capital Management LP plans to sell most of its stake in the lender. Softbank Corp. fell 1.9 percent as Crest Financial Corp. seeks to block the mobile carrier’s acquisition of Sprint Nextel Corp.

The Nikkei 225 fell 0.8 percent to close at 10,599.01 in Tokyo, with trading volume 11 percent higher than the 30-day average. The gauge rose 2.8 percent in this year’s trading debut on Jan. 4 to close at its highest since March 4, 2011. The broader Topix Index today slid 0.8 percent to 881.06.

“The market is definitely showing overheating signs,” said Hitoshi Asaoka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank by market value. “I think the yen may stay under downward pressure until the new Bank of Japan governor is chosen. That’s one reason why the market remains overbought.”

The Topix has risen about 23 percent since Nov. 14 when elections were announced, driving the gauge into a bull market on expectations a new government would call for more stimulus. An advance of 20 percent or more from a low signals a bull market to some investors.

BOJ Reshuffle

Prime Minister Shinzo Abe, a proponent for more easing, will have a chance to reshape the Bank of Japan early this year, when the terms of Governor Masaaki Shirakawa and his two deputies expire. The yen reached 88.41 against the dollar on Jan. 4, the lowest since July 2010. A weaker yen boosts the value of overseas earnings at Japanese exporters.

The Nikkei 225 capped the first drop in six trading days as its 14-day relative strength index was 78 today, above the 70 threshold that some traders say signals a decline. Nomura dropped 5 percent to 498 yen after a record 13-day rally through Jan. 4 pushed its RSI to 94 last week.

Futures on the Standard & Poor’s 500 Index dropped 0.1 percent today. The gauge rose 0.5 percent in New York on Jan. 4, when Labor Department figures showed U.S. payrolls added 155,000 workers last month following a revised 161,000 advance in November. The unemployment rate held at 7.8 percent, matching the lowest level since December 2008.

Aozora, Softbank

Aozora Bank plunged 10 percent to 250 yen after Reuters reported that Cerberus Capital, the lender’s controlling shareholder, plans to sell most of its stake. Shares of the lender reached a four-and-a-half-year high of 278 yen on Jan. 4. Cerberus plans to sell 591.25 million Aozora shares, according to a statement filed after the market closed to the Tokyo Stock Exchange today.

Aozora said in September that Cerberus planned to sell some of its shares, without disclosing the portion. The same month, the Tokyo-based lender unveiled a plan to pay 227.6 billion yen to taxpayers following a bailout, as well as buy back stock and pay a bigger percentage of profit as dividends.

Softbank fell 1.9 percent to 3,065 yen. Crest Financial said Jan. 4 it will ask the U.S. Federal Communications Commission to block Softbank’s $20 billion purchase of Sprint along with Sprint’s planned acquisition of outstanding shares in Clearwire Corp., a company in which Crest holds a stake.

Fujitsu Ltd., a provider of computer services, dropped 5.4 percent to 351 yen after its rating was cut to neutral from overweight at JPMorgan Chase & Co.

The Nikkei Stock Average Volatility Index dropped 6.6 percent to 20.51, indicating traders expect a swing of about 5.9 percent on the benchmark gauge over the next 30 days.

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