Nikkei down on profit outlooks, property shares

TOKYO, July 12: The Nikkei fell 1.45 percent on Wednesday as technology stocks dropped on dimming earnings prospects, while property stocks such as Mitsubishi Estate Co. fell on the prospect of higher interest rates in Japan.

The Bank of Japan starts a two-day policy board meeting on Thursday and is widely expected to lift interest rates from zero for the first time in six years.

Investors turned wary of earnings outlooks as some companies including communications-equipment maker Lucent Technologies Inc.

have issued profit warnings, said Tsuyoshi Nomaguchi, a Japanese equities strategist at Daiwa Securities Co. Ltd.

''Confidence in corporate earnings has been shaken, and at times like these you won't be aggressively buying Japanese auto or technology shares,'' Nomaguchi said.

He added that market sentiment was hurt by the series of bombs that hit Mumbai's rail network in India on Tuesday, killing at least 183 people.

The Nikkei lost 224.50 points to 15,249.32. The broader TOPIX index was down 1.40 percent at 1,563.69.

Growing uncertainty over global security is making stock investment difficult, said Kazuhide Hayashi, a deputy general manager at Norinchukin Zenkyoren Asset Management.

''We have the North Korea problem, and Iran's situation is still unsettling,'' he said, referring to North Korea's missile launches last week and Iran's rebuffing demands to halt uranium enrichment.

He said Japanese companies would not change their full-year forecasts, which are seen as conservative, until October when they announce their midterm earnings results.

''I expect Japanese companies to post about 10 percent profit growth this year ... but such a clear, broad picture won't come out until the interim reports,'' he said.

SOFTBANK UP, TECH DOWN Advantest Corp., a maker of microchip testing equipment, logged a 2.2 percent loss to 11,760 yen. Other technology shares also fell with Kyocera Corp., a mobile handset maker, down 1.5 percent at 8,650 yen and its rival Matsushita Electric Industrial Co. Ltd.

falling 2.3 percent to 2,295 yen.

Hitachi Ltd. dropped 4.3 percent to 730 yen after Japanese utility Chubu Electric Power Co. said problems with Hitachi-made turbines may cause of its nuclear power units to remain shut until March 2007.

Property stocks were down on the anticipated BOJ rate hike.

Mitsubishi Estate shed 3 percent to 2,295 yen and Mitsui Fudosan Co.

Ltd. lost 1.9 percent to 2,390 yen.

Consumer finance company Takefuji Corp. tumbled 7.6 percent to 5,840 yen after its 8.6 percent rally in the previous session. The stock is also dragging down the ''other financial'' subindex IFINS, which was down 3.6 percent and was the worst-performing sector.

A few bright spots included Softbank Corp. which rose 2 percent to 2,250 yen after the Mainichi daily said it was considering buying Fusion Communications Corp., which offers phone services over the Internet. Softbank said the report was speculation.

After the market closed, Shin-Etsu Chemical Co., the world's largest silicon wafer maker, posted a 32.9 percent rise in quarterly profit but left its full-year outlook unchanged.

Prior to the announcement, Shin-Etsu ended down 1.3 percent at 6,320 yen.

Trade was relatively slow, with 1.67 million shares changing hands on the Tokyo exchange's first section, but that was still higher than last week's daily average of 1.52 billion shares.

Decliners overwhelmed advancers by a ratio of more than 7 to 1.

REUTERS