Most Japanese Stocks Decline on Valuation Concerns; Isuzu Rises

By Masaki Kondo

July 28 (Bloomberg) -- Most Japanese stocks fell after the longest rally in two decades swelled the Nikkei 225 Stock Average’s valuations to the highest level in six weeks.

Nippon Carbon Co. dived 3 percent after a newspaper said falling chip demand drove down its profit. Electronics maker NEC Corp. dropped 2.7 percent, breaking its five-day winning streak. Sumitomo Mitsui Financial Group Inc. gained 3.9 percent after Nomura Holdings Inc. recommended buying the bank. Isuzu Motors Ltd. and Yamaha Motor Co. jumped after Mitsubishi UFJ Financial Group Inc. raised their ratings.

“Investor expectations for corporate earnings are running ahead of actual results,” said Masaru Hamasaki, a senior strategist at Tokyo-based Toyota Asset Management Co., which oversees the equivalent of $13 billion. “People are concerned that current share prices are too high.”

The Nikkei 225 Stock Average dipped 1.40, or less than 0.1 percent, to close at 10,087.26 in Tokyo, breaking its nine-day winning streak, the longest since February 1988. The broader Topix index rose 1.87, or 0.2 percent, to 930.13, with five stocks declining for every three that rose.

The Nikkei climbed 11 percent in its nine-day rally as better-than-expected results from U.S. companies such as Goldman Sachs Group Inc. and Apple Inc. boosted confidence in a recovery of the U.S. economy. The estimated price-earnings ratio on the gauge climbed to 41.8 times yesterday, a level not seen since June 15, according to benchmark compiler Nikkei Inc.

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