Nikkei drops as yen hits 7-week high against dollar, falls 3 pct in 2010

21:52, December 30, 2010      

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The Nikkei stock index fell 1.12 percent on the last trading day of 2010 as the yen's appreciation to a seven-week high against the U.S. dollar spurred investors to lock in profits on Thursday.

Despite staging a late year-end rally the Nikkei logged a 3 percent loss for 2010 as the market struggled against a strong yen during the year, worrying investors about the outlook for exporters' earnings.

Japanese stocks have rebounded from the year's lows however and buying from foreign investors has picked up steam since November, following monetary easing by the U.S. Federal Reserve and the Bank of Japan, analysts said.

"Today's move very much symbolizes the trend of the year as the fluctuation of the yen basically drove Japanese stocks," said Masaru Hamasaki, a senior strategist at Toyota Asset Management.

"Today's move represents the full year when the market was driven by the yen," added Tsutomu Yamada, a market analyst in Tokyo at Securities Co. "Investors probably see that Japan won't be able to intervene with yen-selling even if the yen strengthens further."

The 225-issue Nikkei Stock Average closed down 115.62 points from Wednesday to 10,228.92, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange fell 9.21 points, or 1.01 percent, to 898.80.

The yen strengthened to 81.29, from 82.26 at the close of stock trading in Tokyo on Wednesday. Against the euro, the yen appreciated to 107.61 from 108.02. A strong yen erodes profits made overseas by Japanese firms when the yields are repatriated.

"People are selling stocks because they are worried the yen will strengthen further while the Japanese market is closed for several days," said a local asset manager. "It's a good time to take profit because stocks rebounded in November."

Exporter shares retreated as the yen rose, with Sony falling 1 percent to 2,927 yen and Olympus dropping almost 1 percent to 2, 458 yen.

Panasonic lost 1 percent to 1,153 yen and Nintendo Co. retreated 2.4 percent to 23,830 yen as the company said it will ban children ages 6 and younger from using the 3-D functions of its new handheld game machine at an introductory event for the device. The firm announced on its website that looking at 3-D images for too long may "harm the growth of children's eyes."

Among Japanese automakers, Nissan Motor fell 1.5 percent to 773 yen and Isuzu Motor lost 1.6 percent to 369 yen.

Bucking the downward trend however Hitachi Ltd. gained 1.9 percent to 433 yen, following a report in the Yomiuri newspaper that Hitachi and Mitsubishi Heavy Industries Ltd. will make a joint bid for a 350 billion yen (4.29 billion U.S. dollars) Bangkok railroad construction project next month.

Financial issues lost ground Thursday, following a strong performance the previous day, with Mizuho Financial Group falling 2.5 percent to 153 yen and Sumitomo Mitsui Financial Group dropping 2 percent to 2,892 yen. Meanwhile top-lender Mitsubishi UFJ Financial Group declined 1.4 percent to close at 439 yen.

But consumer credit firm Promise Co. surged 3.1 percent to 467 yen, following a report in the Sankei newspaper saying that Sumitomo Mitsui Financial Group Inc. may increase its stake in consumer lending affiliate Promise. Sumitomo Mitsui is ready to support Promise with human resources and operating cash, according to the report.

Nomura Research Institute Ltd. marked a particular black spot on the last trading day of the year, slumping 1.9 percent to 1,808 yen, following the Nikkei newspaper reporting the company will likely post a 20 percent drop in current profit, or pretax profit from operations, to about 27 billion yen (331.3 million U.S. dollars) for the nine months ending in December, hurt by its main customer Nomura Holdings Inc.'s curbs on information technology investments.

Trading volume on Thursday increased to 1.46 billion shares on the Tokyo Exchange's First Section, up from Wednesday's volume of 1.30 billion shares, with declining issues outnumbering advancing ones by 1,290 to 270.

Source: Xinhua
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