Japan’s Nikkei 225 Average Falls as Chip-Gear Makers Retreat

By Patrick Rial

Oct. 21 (Bloomberg) -- Japan’s Nikkei 225 Stock Average fell, led by chip-equipment makers after a measure of industry health declined. Japan Airlines Corp. led gains in the Topix index on speculation the carrier will get government funding.

Advantest Corp., the world’s biggest maker of equipment to test computer-memory chips, sank 1.6 percent after a ratio of sales to orders in the chip-equipment industry decreased to a three-month low. Mitsui Fudosan Co., Japan’s largest property developer, retreated 4.1 percent, and real-estate companies fell the most among the Topix index’s 33 industry groups. Japan Airlines, Asia’s biggest carrier, jumped 6.8 percent after the Nikkei newspaper said a government panel proposed more funding.

The Nikkei 225 lost 3.45 points, or 0.03 percent, to 10,333.39 at the close of trading in Tokyo. The broader Topix added 0.25 point to 913.70. About the same number of shares rose as fell on the benchmark.

“The economic recovery is still intact, but data is showing that the pace of the rebound has started to slacken,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $56 billion. “Investors haven’t forgotten the nightmare we had last year and are quick to sell when they get anxious.”

The Topix sank to a 25-year low on March 12 and has climbed 30 percent since then as governments and central banks moved to ease credit conditions and stimulate growth. Stocks in the gauge are valued at 5.7 times cash flow, compared with an average of 14 times during the past five years.

Book-to-Bill

Advantest fell 1.6 percent to 2,405 yen. Rohm Co., a chipmaker, dropped 2.1 percent to 6,000 yen after Citigroup Inc. cut the shares to “hold” from “buy.” Tokyo Electron Ltd., the world’s second-largest maker of semiconductor equipment, retreated 1.6 percent to 5,680 yen.

The book-to-bill ratio for Japanese manufacturers of chipmaking equipment fell to 1.28 in September, the lowest level since June, according to preliminary figures released by the Semiconductor Equipment Association of Japan.

In New York, the Standard & Poor’s 500 Index retreated from the highest level in a year yesterday, losing 0.6 percent. Housing starts rose 0.5 percent to an annual rate of 590,000 in September, a Commerce Department report showed, missing economists’ estimates.

Real-Estate Companies

Mitsui Fudosan sank 4.1 percent to 1,623 yen. Mitsubishi Estate Co., Japan’s biggest property developer by market value, lost 2.8 percent to 1,457 yen. They were the two largest drags on the Topix. A gauge of real-estate companies rose 14 percent in the past 10 trading days, the second-best-performing industry group in Japan during that period.

“There’s nothing to make overseas investors excited and spur them to increase holdings of Japanese stocks,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees the equivalent of $96 billion. “With earnings coming up, investors want to first gauge the situation before stepping in.”

Japan Airlines Corp. jumped 6.8 percent to 126 yen, the sharpest gain in the Nikkei 225. A government panel recommended the airline receive 300 billion yen ($3.3 billion) in private and public funds, more than an earlier proposal for 150 billion yen, the Nikkei newspaper reported.

Nitto Denko Corp., the world’s largest maker of optical film for liquid-crystal displays, rose 4.8 percent to 2,820 yen. The company said in a preliminary earnings statement yesterday that operating profit for the six months to Sept. 30 totaled 25.5 billion yen, as sales recovered and exceeded analysts’ estimates. Profit also beat estimates.

Toshiba Upgrade

Toshiba Corp., the world’s second-biggest maker of flash memory chips, added 4 percent to 546 yen and was the biggest positive contributor to the Topix. CLSA Ltd. boosted the company’s investment rating to “buy” from “underperform,” on the view that rising use of so-called smart phones will boost demand for the company’s chips.

SanDisk, the biggest maker of flash-memory cards used in digital cameras and mobile phones, said fourth-quarter sales will probably be between $1.1 billion and $1.2 billion, compared with analysts’ estimates for 835.4 million. The shares surged 9.5 percent in late trading in New York.

Taiyo Yuden Co. slumped 4.3 percent to 1,074 yen, the biggest decline in the Nikkei 225, and Japan Aviation Electronics Industry Ltd. dived 3.9 percent to 494 yen. The makers of electronic components were cut to “neutral” from “buy” by Fumihide Goto, a Tokyo-based analyst at UBS AG.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.