Japanese Shares Retreat Amid Chinese Growth Concerns

Japanese shares fell, led by companies that do business in China, amid concern about the growth outlook for Asia’s biggest economy. Exporters slid even as the yen weakened for a sixth day against the dollar.

Machinery companies and nonferrous-metal producers lost the most among the 33 Topix index industry groups. Air-conditioner maker Daikin Industries Ltd. led China-related stocks lower after Goldman Sachs Group Inc. cut its growth forecast for the country. Electronics exporter Panasonic Corp. fell 1.9 percent. Acom Co. jumped 3.2 percent after announcing a stock split, as consumer lenders advanced the most on the broader gauge.

The Topix lost 0.9 percent to 1,089.64 at the close of trading in Tokyo, after rising 1.2 percent. Volume was about 47 percent below the 30-day average. The Nikkei 225 Stock Average fell 1.3 percent to 13,062.78. Gauges of mainland Chinese shares dropped the most since 2009 today.

“Uncertainty about China is increasing and investors wanting to reduce risk are starting to remove capital,” said Takuya Yamada, a senior portfolio manager for Astmas Asset Management Inc. in Tokyo. “It’s not the kind of situation where you can pre-guess the market. The global stock selloff shows just how concerned investors are.”

The MSCI All-Country World Index, a gauge of developed and emerging market shares, sank the most in a year last week. The MSCI Asia Pacific Index dropped as much as 1.9 percent today. Hong Kong’s Hang Seng Index slumped as much as 2.5 percent, while China’s CSI 300 Index plunged 6.3 percent and into a bear market amid concerns about a cash crunch in the financial system and slowing economic growth.

Daikin Slides

Daikin, which counts the world’s second-largest economy as its biggest market outside Japan, slumped 6.6 percent to 3,980 yen. Fanuc Corp., which supplies robotics to Chinese factories, slid 2.3 percent to 14,270 yen. Trading company Sojitz Corp., which gets 21 percent of its revenue from Asia and Oceania, slipped 1.2 percent to 165 yen.

Concerns about China’s cash crunch grew last week after interbank lending rates surged to a record. Both Goldman Sachs and China International Capital Corp. reduced their 2013 gross domestic product-growth forecasts for the country to 7.4 percent from 7.8 percent and 7.7 percent, respectively.

Exporters closed lower today, erasing gains from the morning session, even as the yen fell as much as 0.8 percent against the dollar and traded at about 98.38 at the close of stock trading in Tokyo. The Japanese currency has retreated against the greenback every day since June 14, the longest losing streak since November.

Carmakers and consumer electronics makers, which have the biggest weighting among the Topix industry groups, exerted the biggest drag on the gauge.

Panasonic Tumbles

Panasonic, which gets about half of revenue outside Japan, slid 1.9 percent to 719 yen. Toyota Motor Corp., the world’s biggest carmaker, declined 1.5 percent to 5,750 yen. Nissan Motor Co., which generates 34 percent of sales from North America and 20 percent from Asia, fell 3.4 percent to 995 yen.

The Topix has retreated about 15 percent from an almost five-year high on May 22. Shares have declined amid a strengthening yen, disappointment about Prime Minister Shinzo Abe’s growth strategy, the “third arrow” of his policy package, and concern global stimulus will be reduced.

Japan’s Liberal Democratic Party-led coalition won nearly two-thirds of the seats in a weekend Tokyo assembly election, increasing optimism it will succeed in a national upper-house poll expected on July 21. Victory for the ruling coalition in the national poll would end the hung parliament that has hampered decision-making.

Election Victory

“Investors are looking positively at the weaker yen and likelihood of the LDP winning” the elections, said Hiroaki Hiwada, a strategist at Toyo Securities Co. in Tokyo. “But it’s still unclear what effect U.S. monetary-easing tapering will have on the market, so strong buy orders are unlikely. The market will probably trade range-bound for a while.”

The Topix has swung an average of about 3.2 percent daily since May 22. The gauge’s 30-day historic volatility was at 40.85 today, near its highest level since the 2011 earthquake and tsunami.

“Maybe some have been disappointed by the economic growth strategies they have seen from Japan so far,” said Takahiro Mitani, president of the Government Pension Investment Fund, the world’s biggest manager of retirement savings. “When people tell me they are disappointed, I tell them that there is the elections, so once the elections are over we may see Arrow 3.5. Abe has basically said that too.”

‘Very Difficult’

GPIF announced on June 7 that it raised its target holding for local shares to 12 percent from 11 percent. The allocations given this month are close to what the fund already holds, Mitani said on June 21, and it doesn’t intend to change them until at least March 2015. Mitani also said it would be “very difficult” for the Bank of Japan to reach its 2 percent inflation target in the next two years.

Even after the recent decline, the Nikkei 225 and Topix are still up more than 26 percent this year, retaining Japan’s position as the best-performing major equity market.

Among shares that rose, Acom jumped 3.2 percent to 3,035 yen after saying it would split shares 10-for-1. Consumer lenders rose 0.9 percent, the most among the Topix sub-sectors.

Japan’s broader gauge may rise to 1,300 by the end of the year, according to the median estimate of 17 strategists surveyed by Bloomberg. Earnings for companies on the measure will jump 53 percent this fiscal year to 78.85 yen a share, according to analyst estimates compiled by Bloomberg.