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Topix Pares Best Quarterly Gain Since 2013 as Rail Stocks Drop

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Japan’s Topix index fell, paring its strongest quarterly advance since 2013, as investors sold some of the best-performing stocks.

Central Japan Railway Co., which gained 27 percent this year through Monday, slumped 5.4 percent. Shimamura Co. slid 7.1 percent after the clothing retailer reported full-year earnings that missed its forecast. The Topix Pharmaceutical Index, which gained the most this quarter among the broader gauge’s 33 industry groups, dropped 1.4 percent. Glass and ceramics makers led gains among the groups after China announced support for its housing market.

The Topix fell 0.9 percent to 1,543.11 at the close in Tokyo, reversing gains of as much as 1.4 percent. The measure surged 9.6 percent this quarter, the most since the period ended March 2013. The Nikkei 225 Stock Average slid 1.1 percent to 19,206.99, capping a 10 percent quarterly gain. Today is the final day of the financial year for most Japanese companies, with the earnings reporting season running from late April through the middle of May.

“There were more investors who wanted to sell the winners,” said Yasuyuki Suda, Tokyo-based general manager at Mito Securities Co. “We had quite a strong start, but it seemed that investors weren’t willing to buy at the high prices. This creates a bit of a negative feeling heading into the first day of the next fiscal year.”

Central Japan Railway fell 5.4 percent to 21,745 yen. Tokyo Disney Resort operator Oriental Land Co. declined 5.7 percent to 9,905 yen, trimming its three-month advance to 31 percent. Eisai Co. was the biggest drag on the Topix drugmaker gauge, sliding 3 percent to 8,535 yen. It’s still up 83 percent since Dec. 31, the steepest advance on the Nikkei 225.

Quarterly Rally

Japan stocks benefited this quarter from global demand for equities, and also rallied on expectations for local corporate governance reform and higher company profits, said Koichi Kurose, Tokyo-based chief market strategist at Resona Bank Ltd.

“We’re now entering a phase where investors will be watching full-year earnings very closely to see if companies can really meet expectations of higher dividends, share buybacks, and better governance,” said Kurose. “If companies meet those expectations this rally will keep going, but if they can’t we’re headed lower.”

Shimamura slumped 7.1 percent to 11,120 yen after reporting profit of 23.3 billion yen ($194 million) in the year through Feb. 20, missing its 28.3 billion yen forecast. Shares fell even as the company projected earnings of 29.6 billion yen for the current fiscal year, topping analyst estimates for a 26.1 billion-yen gain.

Aozora Bank Ltd. slid 3.6 percent to 426 yen after Mitsubishi UFJ Morgan Stanley Securities Co. cut its rating on the stock to underweight from neutral. Analyst Katsuhito Sasajima set a 12-month price target of 390 yen for the shares.

China Connections

Japanese companies that do business in China rallied after the People’s Bank of China took steps Monday to revive a slumping property market, with Toto Ltd. leading gains on the Nikkei 225. The toilet manufacturer, which gets about 10 percent of sales from Asia’s largest economy, jumped 4.6 percent to 1,785 yen. Nihon Flush Co., a maker of wooden interior materials that gets more than half of its sales from China, climbed 4.3 percent to 1,666 yen.

E-mini futures on the Standard & Poor’s 500 Index slipped 0.3 percent after the underlying measure rose 1.2 percent Monday in New York, capping its first two-day rally since Feb. 17 and extending a ninth quarterly gain.

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