Nikkei stumbles as property shares decline

TOKYO, Mar 16: The Nikkei average fell 1.37 per cent on Thursday, reversing opening gains as property firms fell after Sumitomo Realty&Development Co. Ltd. was hit by a brokerage downgrade and by concerns about the impact of higher borrowing costs on the sector.

Shares in Sony Corp. fell for the third straight session. It is delaying the release of its new PlayStation 3 videogame console by about half a year, until early November.

Shares in Seiko Epson Corp. may be in focus on Friday after it said it expects a recurring profit of 1 million in the year starting in April, a 54 per cent jump from its 2005/06 projection.

Sumitomo Realty fell 6.6 per cent to 2,820, becoming the biggest percentage decliner on the Nikkei 225, after Mizuho Securities lowered its rating on the firm citing recent rises in the share price. Other property firms fell, in part on concerns that higher borrowing costs may eventually crimp earnings.

''No one expects interest rates to jump higher all of a sudden.

They are more likely to rise slowly ... but once they do begin to creep up, it's true that will make things tougher for property firms, which borrow large amounts of money,'' said Tsutomu Yamada, a market analyst at kabu.com Securities.

The Nikkei ended down 222.83 points at 16,096.21, its lowest finish in a week.

The broader TOPIX index was down 1.30 per cent at 1,645.06.

Mitsui Fudosan Co. Ltd., Japan's biggest real estate firm, fell 4.4 per cent to 2,510 yen and second-ranked Mitsubishi Estate Co. Ltd.

gave up 3.2 per cent to 2,455 yen.

Electronics and entertainment conglomerate Sony fell 1.8 per cent to 5,370 yen, helping to weigh on the tech-sensitive Nikkei. The company said the launch of the new game console would be delayed because development of some of the technology was behind schedule.

RATE CONCERNS OVERDONE? Bank of Japan Governor Toshihiko Fukui sought on Thursday to tame market expectations of an imminent rate hike, saying the central bank would keep rates near zero for a while despite ending its ultra-easy policy framework last week.

Some investors investors said recent concerns that an interest rate rise would damage Japanese shares were overdone.

''I don't think there would be that much of an influence (on earnings). After all, rates are unlikely to rise enough to cause a real problem,'' said Jun Morita, a fund manager at Chibagin Asset Management.

''Investors could be using this just as an excuse to take profits.'' Following the close of trade cable broadcaster Usen Corp. said it would form an operational tie-up with Internet firm Livedoor Co.

Shares in Usen closed down 4.7 per cent at 2,715 yen on the Osaka exchange's Hercules market for start-ups, hit by profit-taking after speculation about such a move had boosted the share price in the previous session.

Shares in Softbank fell 1.3 per cent to 3,020 yen after news that two U.S. private equity firms plan a billion offer for the Japanese unit of Vodafone Group Plc.

That could threaten the Internet firm's talks on buying a controlling stake in Vodafone Japan.

Shares in banks were also hit, with Sumitomo Mitsui Financial Group Inc. falling 3.2 per cent to 1.22 million yen on a report that Goldman Sachs Group Inc. plans to sell part of its preferred shares in the lender.

Goldman's Chief Operating Officer David Viniar said shares in Japan's third-largest bank were overpriced in terms of fair market value, the Nihon Keizai business daily said.

Mitsubishi UFJ Financial Group Inc., the world's largest bank by assets, fell 2.4 per cent to 1.65 million yen.

Shares in Canon Inc. finished up 1.2 per cent at 7,400 yen, following a report that it would likely beat its January-March group net profit forecast.

Toyota Tsusho Corp. added 1.4 per cent to 2,880 yen after the Nikkei average compiler Nihon Keizai Shimbun Inc. said thetrading firm will be added to the Nikkei 225 share average.

Trading volume totalled 1.77 billion shares on the Tokyo exchange's first section, falling below last year's daily average of 2.07 billion for the fourth straight session. Decliners outnumbered gainers 1,326 to 286.

REUTERS