Most Japanese Stocks Fall, Led by Steelmakers, on Price Concern

By Masaki Kondo
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Aug. 12 (Bloomberg) -- Most Japanese stocks fell on concern falling product prices will dent steelmakers' earnings and the highest inflation in almost three decades will erode profit margins at manufacturers.

JFE Holdings Inc., Japan's second-biggest steelmaker, led makers of the alloy to the biggest decline in a week on speculation record exports from China will weigh on prices. Snow Brand Milk Products Co. sank the most in five years as materials costs cut profit. Mitsui Sumitomo Insurance Group Holdings Inc. rose to the highest this month after keeping its earnings targets.

``Increased exports from China will lead to a drop in steel prices,'' said Mitsushige Akino, who oversees the equivalent of $468 million at Ichiyoshi Investment Management Co. in Tokyo. ``Falling auto sales are cutting revenue at Japanese steelmakers, while production costs remain high.''

The Nikkei 225 Stock Average fell 47.16, or 0.4 percent, to 13,383.75 as of 12:48 p.m. in Tokyo. The broader Topix index rose 1.64, or 0.1 percent, to 1,281.64, after falling sliding as much as 0.4 percent. Almost two shares retreated for each that advanced on the Topix.

China's steel exports climbed 38 percent in July from the previous month, the nation's customs office said yesterday. The same day, the Japan Iron and Steel Federation reported June orders for steel fell 0.8 percent from the previous month.

Meanwhile, Japan's wholesale inflation rate accelerated to a 27-year high in July, the Bank of Japan said today. Producer prices, the costs companies pay for energy and raw materials, climbed 7.1 percent from a year earlier, exceeding the 5.7 percent estimate by economists.

Material Costs

JFE fell 3.8 percent to 4,590 yen, while bigger rival Nippon Steel Corp. sank 3.5 percent to 522 yen. Sumitomo Metal Industries Ltd. dropped 3.2 percent to 460 yen. Steelmakers fell to the lowest since August 5 and posted the biggest decline among 33 groups on the Topix.

Snow Brand tumbled 13 percent to 358 yen, set for the sharpest drop since February 2003, after net income fell 12 percent. Ajinomoto Co., the nation's largest maker of food additives, lost 3 percent to 1,044 yen, after increasing materials costs drove down first-quarter profit by 57 percent. Nikko Citigroup Ltd. lowered its recommendation on the stock to ``hold'' from ``buy.''

Mitsui Sumitomo Insurance jumped 5.8 percent to 3,450 yen, set for the highest since July 31. The company yesterday reiterated its annual earnings targets after reporting a 0.2 percent increase in first-quarter net income. Tokio Marine Holdings Inc., Japan's largest publicly traded insurance company, added 3.3 percent to 3,740 yen after saying it will buy back up to 2.2 percent of its shares.

Insurers were the second-biggest contributor to the Topix's gain after banks.

Nikkei futures expiring in September lost 0.1 percent to 13,380 in Osaka and added 0.1 percent to 13,375 in Singapore.

To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.