Japan's Stocks Fall on Slumping Earnings Outlook; Mazda Drops

By Masaki Kondo

Oct. 15 (Bloomberg) -- Japan's stocks fell as concern slowing demand will weigh on company earnings overshadowed the U.S. government's plan to inject $250 billion into banks.

Mazda Motor Corp., Japan's fourth-largest automaker, slumped 6.7 percent on a newspaper report the company will delay building a factory in North America as sales fall. Nippon Yusen K.K., the nation's biggest shipping line, dropped 6.6 percent after transport fees for commodities fell to the lowest level in three years. Elpida Memory Inc. was poised to tumble after reporting a second-quarter loss and saying it will issue convertible bonds.

``Investors are keen to see if stock markets can sustain their rally against the outlook for a worsening economy,'' Hiroichi Nishi, an equities manager at Tokyo-based Nikko Cordial Securities Inc., said in an interview with Bloomberg TV.

The Nikkei 225 Stock Average lost 81.46, or 0.9 percent, to 9,366.11 as of 9:30 a.m. in Tokyo. The broader Topix index fell 13.00, or 1.4 percent, to 943.30. About two stocks sank for each that rose on the Topix.

Yesterday, the Nikkei and the Topix both rose 14 percent, their steepest rallies ever, on optimism the U.S. bank rescue will avert the collapse of global financial markets.

With the equity purchases, nine U.S. banks including Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. will receive a total of $125 billion, according to people briefed on the matter. Treasury Secretary Henry Paulson urged banks to channel the money to customers rather than hoard it.

The financial crisis that claimed Bear Stearns Cos and Lehman Brothers Holdings Inc. is damping demand for Japanese-made goods. Falling sales pushed Mazda to postpone constructing a factory in North America, Nikkei English News said, while Yamaha Motor Co. said it will halt production in Brazil for 10 days.

Shipping Companies

Mazda fell 6.7 percent to 293 yen, while Yamaha lost 5.6 percent to 1,165 yen. Toyota Motor Corp., Japan's biggest automaker, slid 2.7 percent to 3,620 yen.

Nippon Yusen dropped 6.6 percent to 497 yen, and Mitsui O.S.K. Lines Ltd., Japan's second-biggest shipping company, retreated 4.8 percent to 641 yen. Kawasaki Kisen Kaisha Ltd., the third largest, declined 6.2 percent to 467 yen. Shippers posted the steepest drop among the Topix industry groups.

The Baltic Dry Index, a measure of commodity-shipping costs, slipped 8.5 percent to the lowest level since August 2005 as tightening credit prevented businesses from financing cargoes. A 1,000 point change in the Baltic alters Nippon Yusen's annual pretax profit by 15 billion yen ($147 million), UBS AG analyst Jun Harada wrote in a report yesterday, citing the company.

Elpida wasn't traded as orders to sell outnumbered those to buy. The company, Japan's largest maker of computer-memory chips, yesterday said it had a loss of about 32.2 billion yen in the three months to Sept. 30, compared with a profit a year earlier, as a glut drove down semiconductor prices. Elpida also said it will sell 50 billion yen in convertible bonds to upgrade equipment.

Nikkei futures expiring in December retreated 2.9 percent to 9,400 in Osaka and slumped 1.9 percent to 9,415 in Singapore.

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