By Patrick Rial and Kotaro Tsunetomi
July 9 (Bloomberg) -- Japanese stocks slumped for a seventh day on the strong yen and concern the economic recovery will be delayed as companies report falling profits.
Honda Motor Co., which generates almost half its sales in North America, declined 2.7 percent. Electronics retailer Bic Camera Inc. fell 5.1 percent after posting a 57 percent drop in nine-month profit. Chuo Mitsui Trust Holdings Inc., the country’s sixth-largest bank, dropped 5.1 percent after the Nikkei newspaper said a government agency will order the lender to improve its business.
The Nikkei 225 Stock Average fell 129.69, or 1.4 percent, to 9,291.06 at the close of trading in Tokyo, extending its decline to 6.7 percent during the seven-day losing streak. The broader Topix index lost 1.7 percent to 873.91, the lowest close since May 18.
“The market is becoming cautious with regards to the outlook for earnings and the economy,” said Fujio Ando, a fund manager at Tokyo-based Chibagin Asset Management Co. “If this level of the yen continues, we could see some exporters be forced to cut their profit outlooks.”
Mitsui O.S.K. Lines Ltd. climbed after Nikko Citigroup Ltd. said China’s demand for high quality iron ore should push freight charges up.
In New York, the Standard & Poor’s 500 Index slipped 0.2 percent, led by telecommunications companies after a brokerage cut their profit estimates. Alcoa Inc., which kicked off second- quarter earnings announcements yesterday, gained 4 percent in after-hours trading after reporting a narrower loss than analysts expected.
Yamaha Motor
The Topix soared as much as 36 percent from a quarter- century low reached in March on rising confidence government stimulus steps would revive growth. Worse-than-expected U.S. unemployment data on July 2 prompted concern the recovery will be delayed and helped send the gauge lower for seven-straight days, its longest losing streak since July 2008.
“The economy isn’t going to embark on a sustainable recovery, so we shouldn’t expect stock prices to do so either,” said Kazuyuki Terao, a Tokyo-based manager at the Japanese unit of Allianz SE, which oversees $1.6 trillion.
Honda fell 2.7 percent to 2,325 yen. Ricoh Co., Japan’s second-largest office-equipment maker, declined 3.6 percent to 1,129 yen.
Yamaha Motor Co., the world’s second-largest motorcycle maker, dropped 1.3 percent after Nomura Holdings Inc. gave the stock a “reduce” recommendation. The company’s earnings from U.S. motorcycle and boat sales have suffered as a result of the recession, Nomura’s Shotaro Noguchi wrote in a report dated yesterday. Noguchi began coverage yesterday of the auto industry with a “neutral” stance.
Demand ‘Gloomy’
“While the demand outlook remains gloomy, we consider automakers capable of transforming Japan’s industrial landscape if that is the price of survival,” the analyst wrote, adding that foreign exchange movements “represent the greatest risk.”
The yen rose to as high as 91.81 against the dollar, a level not seen since February, amid concern U.S. earnings will show weakness. The currency later weakened to as low as 93.52, helping export-related shares to pare declines.
Bic Camera tumbled 5.1 percent to 36,100 yen after sluggish sales of air conditioners and personal computers caused earnings to fall for the nine months to May 31. Union Tool Co., a maker of drill bits used for piercing printed circuit boards, plunged 7 percent to 2,315 yen after swinging to a net loss in the first half of the year. Shiseido Co., Japan’s largest maker of cosmetics and toiletries, fell 2.7 percent after Nomura cut the stock to “neutral” on the view that domestic sales will likely remain weak.
Banks, Brokerages
Chuo Mitsui slumped 5.1 percent to 316 yen. Aozora Bank Ltd. dropped 4.6 percent, while Shinsei Bank Ltd. fell 3.6 percent. The Financial Services Agency will force the three banks to submit business improvement plans after they failed to hit profit targets for companies receiving public funds, the Nikkei reported.
Daiwa Securities Group Inc., Japan’s second-largest brokerage, slipped 2.4 percent to 519 yen after the company said it will raise about 40 billion yen less in a new share sale than originally targeted.
Mitsui O.S.K., the world’s largest operator of iron-ore vessels, rose 0.5 percent to 558 yen. Naoko Matsumoto, an analyst at Nikko Citigroup, lifted her recommendation on the company to “buy.” The decline in quality of China’s domestically produced iron ore should lead to more imports from countries such as Brazil, boosting cargo rates, the analyst wrote.
“Equities are now at the level where the probability of further gains seems about even with the chance of losses, prompting some investors to lock in profits,” said Yuichi Chiguchi, who helps manage about $8.6 billion at Diam Co. in Tokyo. “From a very long-term perspective this is a good time to be a buyer.”
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Kotaro Tsunetomi in Tokyo at ktsunetomi@bloomberg.net.
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