By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — Japanese stocks ended at their lowest level in more than a month Monday as a strengthened yen weighed down exporters, while economic worries hurt mainland Chinese shares.
The Nikkei Stock Average (NIKKEI:JP:NIK) ended 3.3% down at 13,661.13 for its lowest finish since June 27, while the Shanghai Composite (SHG:CN:SHCOMP) fell 1.7%. Both benchmarks had also dropped in the previous three sessions.
Tokyo Stock Exchange Enlarge Image
The losses in Tokyo came ahead of a busy week of earnings, with Toyota Motor Corp. (TKS:JP:7203) (NYS:TM) , Honda Motor Co. (TKS:JP:7267) (NYS:HMC) , Sony Corp. (TKS:JP:6758) (NYS:SNE) and Softbank Corp. (TKS:JP:9984) (OTC:SFTBF) due to announce their quarterly results and update their outlook.
“Net income is expected to surge as much at 75% for multinationals and 33% for domestic-facing firms, ... with Abenomics sending the yen into a 20% deflation spiral over the last 12 months,” said IG Markets strategist Evan Lucas, referring to the economic policies initiated by Japanese Prime Minister Shinzo Abe.
The U.S. dollar (XTUP:USDJPY) has risen nearly 25% against the yen over the last 12 months, boosting Japanese exporters’ global competitiveness and repatriated profits. The euro (XTUP:EURJPY) has risen more than 34% against the Japanese currency over the last year.
On Monday, concerns over the U.S. dollar’s recent fall against the yen weighed on shares of companies with a large overseas exposure as the greenback slid under the ¥98-level.
Shares of Toshiba Corp. (TKS:JP:6502) (OTC:TOSYY) gave up 5% and Japan Tobacco Inc. (TKS:JP:2914) (OTC:JAPAF) lost 4.9%, while JFE Holdings Inc. (TKS:JP:5411) (OTC:JFEEF) slumped 6%, also weighed by a profit outlook that missed expectations.
Renesas Electronics Corp. (TKS:JP:6723) (OTC:RNECY) plunged 8.7% after the Nikkei newspaper reported on Friday the company had firmed plans to shut down a chip foundry in Japan’s Yamagata prefecture.
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Telecommunications firm KDDI Corp. (TKS:JP:9433) (OTC:KDDIY) ended 1.4% lower. The stock had risen more than 2% earlier in the day, after the Nikkei newspaper reported the company was expected to post a record-high operating profit, but reversed those gains in afternoon trading
Nomura Holdings Inc. (TKS:JP:8604) (NYS:NMR) slid 5.7% in the downbeat market, even as the broker reported a sharp surge in quarterly profits from the year-ago period. The stock is still up more than 50% so far in 2013.
Shares of Fanuc Corp. (TKS:JP:6954) (OTC:FANUY) rose 2.1% to rank among the few gainers, after the industrial automation firm reported better-than-forecast fiscal first-quarter results.
Meanwhile, official data released before the stock market’s open showed Japan’s retail sales climbed 1.6% in June from the year-ago month, though just short of forecasts.
Elsewhere in the region, South Korea’s Kospi (KOREA:KR:180721) ended 0.6% lower, while Australia’s S&P/ASX 200 (S&P:AU:XJO) ended 0.1% higher after a choppy trading session. Hong Kong’s Hang Seng Index (HONG:HK:HSI) declined 0.5%.
The region’s losses came ahead of a slew of key economic data this week, including the outcome of the Federal Reserve’s and the European Central Bank’s policy meetings, and the Purchasing Managers’ Index indicators on Chinese factories.
The drop in Shanghai and Hong Kong followed data from the National Bureau of Statistics over the weekend, showing that Chinese industrial profits rose 6.3% in June from the same month a year earlier. The increase marked a sharp slowdown from a 15.5% rise in profits in May, according to a Bloomberg report.
/zigman2/quotes/210598065/realtime DJIA 27,433.48, +46.50, +0.17%
Crédit Agricole strategist Dariusz Kowalczyk said the slowdown in profits fits the picture of weakening momentum in the economy, but it may also prompt policy action to support the government’s targeted economic growth of 7.5% for 2013.
“The weaker the numbers now, the stronger the government’s response will be to revive growth,” Kowalczyk said in emailed comments.
The drop in Chinese equities also came after Beijing ordered China’s National Audit Office to conduct an urgent review of overall public debt.
Banks and property developers suffered declines, with Bank of Communications Co. (HKG:HK:3328) (OTC:BCMXY) or BoCom, losing 1.8%, and China Resources Land Ltd. (HKG:HK:1109) (OTC:CRBJF) shed 2.9% in Hong Kong.
In Shanghai, BoCom (SHG:CN:601328) fell 1.9%, and real-estate major Gemdale Corp. (SHG:CN:600383) stumbled 4.2%.
Shares of Evolution Mining Ltd. (ASX:AU:EVN) (OTC:CAHPF) dropped 1.2% in Sydney on the gold producer’s planned write-down on assets following a drop in the metal’s prices.