Nikkei struggles; property shrs up, chip firms down

TOKYO, Feb 22 (Reuters) The Nikkei hovered in and out of negative territory on Wednesday as property stocks extended gains while chip stocks such as Tokyo Electron Ltd. dropped following falls in their U.S. rivals.

Analysts said recent falls have pushed down stock prices to attractive levels, but investors are not aggressively snapping up stocks yet. The Nikkei had lost nearly 8 percent in the two weeks through Tuesday, when the benchmark posted its biggest one-day percentage gain in three weeks.

''The market has factored in a pickup in the economic recovery ... we need new incentives to buy such as strong earnings forecasts for the next fiscal year,'' said Katsuhiko Kodama, senior strategist Toyo Securities Co. Ltd.

As of 0132 GMT, the Nikkei average was down 0.49 percent, or 78.07 points, at 15,816.87 as of 0111 GMT. On Tuesday he benchmark rose 2.96 percent, the biggest percentage point rise in three weeks.

The broader TOPIX index was up 0.12 percent at 1,614.54.

Toyo Securities' Kodama also said daily trading volume has been falling to near or even below 2 billion shares on the Tokyo Stock Exchange's first section, compared with daily average volume of 2.5 billion shares in January, weighing on the market.

''We need volume to ride out selling pressure,'' he added.

Tsutomu Yamada, market analyst at Kabu.com Securities Co., said it might take time for the market to make a comeback.

''The market appears to have bottomed out for now, but it's not going to be a V-shaped recovery,'' Yamada said.

Tokyo Electron fell 2.5 percent to 7,890 yen while its peer Advantest Corp., the world's largest maker of chip testing devices, declined 2.2 percent to 13,050 yen.

Citigroup on Tuesday lowered its weighting on the semiconductor sector and semiconductor equipment industry group to ''market weight'' from ''overweight'', citing the possibility that production capacity growth could drag down chip pricing and erode industry margins.

Victor Co. of Japan Ltd. (JVC) fell 2.1 percent to 606 yen dropped after the electronics maker nearly tripled its loss forecast on Tuesday, while Softbank Corp., regarded as a gauge of retail investor sentiment, was down 4.3 percent to 3,570 yen.

On the other hand, property stocks extended their gains on continued hopes for increasing rents and a pickup in land prices.

The government will release official land price data in late March.

Japan's largest developer, Mitsui Fudosan Co. Ltd., was up 0.2 percent at 2,350 yen, following a 7 percent rise on Tuesday, and No.2 Mitsubishi Estate Co Ltd. added 1.5 percent to 2,420 yen, extending its 6 percent gain from the previous session.

REUTERS PDS RAI0717