Nikkei falls 0.6 pct, Softbank and Yahoo suffer

TOKYO, Sep 6 (Reuters) The Nikkei average fell 0.62 percent on Wednesday as Softbank Corp. and Yahoo Japan Corp.

declined on a bearish broker report from Credit Suisse, while recent gainers such as Canon Inc. also came under pressure.

Baby goods makers met a flurry of selling as investors grabbed profits after a run-up by the stocks ahead of the birth of a royal baby boy on Wednesday.

A looming reshuffle of the Nikkei, the benchmark market measure, produced both winners and losers.

Nippon Flour Mills Co. Ltd. and movie producer Toei Co. Ltd.

fell on news they will be cut from the Nikkei next month, while general contractor Kumagai Gumi Co. Ltd. surged 16 percent on relief that it will stay.

The Nikkei dropped 101.87 points to 16,284.09. The average had hit a three-month closing high for the second straight session on Tuesday. The broader TOPIX index fell 0.52 percent to 1,642.82.

Speculative selling was seen in the futures market ahead of Friday when Nikkei September option and futures contracts are expected to be settled, said Tsutomu Yamada, market analyst at Kabu.com Securities Co.

''It looks like someone is keeping the market from going higher,'' he said.

Traders said some investors remained wary of earnings prospects so trade may be dominated by those seeking short-term gains. But Katsuhiko Mori, a senior portfolio manager at Daiwa SB Investments, said he remains optimistic.

''The market may be in a bind but corporate earnings results for the first half should give a sense of relief to investors,'' he said.

SOFTBANK LOSES SHINE Internet and communications conglomerate Softbank lost 5.6 percent to 2,180 yen, making it the biggest drag on the Nikkei, after Credit Suisse cut its rating on the stock to ''underperform'' from ''neutral'' and almost halved its target price to 1,340 yen from 2,620 yen.

''Softbank represents retail investors' basic stance on their investments,'' said Kenichi Hirano, operating officer at Tachibana Securities. ''So when the stock falls, that dampens market sentiment.'' Softbank had jumped 5.7 percent on the previous day, taking its gains to more than 15 percent since it hit a one-month low of 1,995 yen on Aug. 28 after Lehman Brothers lowered its target price on the stock to 900 yen.

''No one really knows the fair value for Softbank. That's why the stock swings so much,'' said Yamada of Kabu.com Securities.

Credit Suisse started coverage of Web portal Yahoo Japan with a rating of ''underperform'' and set a target price of 39,000 yen. Yahoo Japan shed 3.9 percent to 45,150 yen.

Some aerospace-related stocks gained after a media report on the building of Japan's first passenger jet.

Mitsubishi Heavy Industries Ltd., which is involved in the project, rose 0.6 percent to 521 yen and Sumitomo Titanium Corp.

, which makes titanium products used in aerospace, rose 3 percent to 26,830 yen.

But shares of baby stroller maker Combi Corp. plunged 10.2 percent to 884 yen, to become the biggest loser on the Tokyo Stock Exchange's first section. Shares of baby goods makers have surged in recent days on hopes the royal birth would boost the country's sagging birth rate.

NIKKEI REJIG Outgoing and incoming shares in the Nikkei annual reshuffle next month went separate ways.

Inclusion in a major share average attracts investment fund buying, especially from funds that track the index, so it was no surprise that firms due to fall out of the Nikkei suffered.

Nippon Flour Mills fell 2.6 percent to 536 yen and movie producer Toei lost 1.1 percent to 903 yen.

Movie producer Toho Co. Ltd., to be added to the Nikkei, rose 0.4 percent to 2,505 yen but another new addition Tokyu Land Corp. slipped 0.8 percent to 1,083 yen.

Retailer Yamada Denki Co. Ltd. lost 5 percent to 12,270 yen and financial services firm SBI Holdings Inc. dropped 3.6 percent to 45,300 yen on disappointment they would not join the average.

The biggest beneficiary of the rejig news was general contractor Kumagai Gumi Co. Ltd. which surged 16 percent to 309 yen, as it will stay in the Nikkei, against the expectations of some.

Profit-taking hit Canon, which dropped 0.8 percent to 5,930 yen, having risen nearly 9 percent in the past one month.

Separately, Fast Retailing Co ended down 1.6 percent at 10,940 yen even after the company said it planned to invest in a U.S. retailer in the next two to three years to expand its business in the country.

Trade was active, with 1.91 billion shares changing hands on the Tokyo exchange's first section, the highest total since Aug. 17. Decliners more than doubled gainers 1,062 to 516.

REUTERS CS DS1400