Nikkei flat, oil hits energy stocks

Tokyo, Aug 7: The Nikkei average was flat on Tuesday afternoon, giving up gains after a sharp drop in crude oil prices hit trading house Mitsubishi Corp. and other energy-related stocks, while blue-chips such as Kyocera Corp.

fell amid concerns about a global credit squeeze.

But overall losses were offset by gains in software maker Trend Micro, which rose 13.1 percent to 4,070 yen after lifting its forecast for the second quarter. But bank shares continued to head south, putting the TOPIX index under pressure.

The Nikkei got off to a strong start in the morning but failed to keep its gains due to a dearth of active buying by the foreign investors who play a major role in the Tokyo market.

''Foreign investors account for about 60 percent of the Tokyo market and even if the remaining 40 percent of domestic investors try to bolster the market there's a limit,'' said Masayoshi Okamoto, head of dealing at Jujiya Securities.

Investors were also sidelined ahead of the Federal Reserve's interest rate decision and statement on Tuesday.

The Nikkei was down 0.02 percent or 4.19 points at 16,910.27 as of 0436 GMT. The broader TOPIX shed 0.42 percent to 1,661.08.

Yasuo Yabe, director of sales at Meiwa Securities, agreed that the absence of foreign investors in the market was taking a toll.

''Japanese stocks look cheap on a PE basis, but I don't think foreign investors have the luxury of buying when their home market is volatile,'' he said. The impact of subprime mortgage problems on the U.S. economy remains to be seen, Yabe said.

Exporters declined with electronic parts maker Kyocera falling 1.4 percent to 11,190 yen.

U.S. crude oil futures plummeted more than 5 percent on Monday as signs of slowing economic growth raised worries that demand for petroleum products could be impaired, hitting Japanese energy stocks.

Mitsubishi Corp. fell 3.9 percent to 3,240 yen and fellow trading firm Mitsui &Co. declined 4.8 percent to 2,495 yen. Oil and gas developer INPEX Holdings Inc. plunged 8.9 percent to 1.03 million yen.

In the banking sector, Mizuho Financial Group Inc. was down 2.4 percent at 685,000 yen, extending its losing streak into a ninth straight session.

Reuters>