Japan: Nikkei set to struggle after hitting 20-month lows

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Friday, October 27 7:17 PM SGT

Nikkei set to struggle after plumbing 20-month lows TOKYO, Oct 27 (AFP) - Tokyo's headline Nikkei-225 share index will struggle to emerge from its 20-month lows next week because of a likely downturn on Wall Street, dealers said.

"The stock market will be sensitive to corporate earnings reports as investors remain jittery about slowing US corporate activity," said Masaaki Higashida, deputy head of investment information at Nomura Securities.

The Tokyo Stock Exchange's Nikkei-225 index lost 616.53 points, or 4.1 percent, over the past week to close at 14,582.20, its lowest finish since March 4 last year, when it ended at 14,183.45.

The Topix benchmark of all issues on the exchange's first section fell 33.99 points to 1,400.27.

Turnover on the major board totalled an estimated 467.5 million shares worth 655.25 billion yen (6.1 billion dollars), against the previous week's 494.1 million shares worth 711.60 billion yen.

A big interim loss for Sony Corp. revived jitters over the outlook for the high-technology sector after New York's Nasdaq market was hit by a poorer revenue performance by Canadian telecom equipment maker Nortel Networks Corp.

The Nikkei was likely to be stuck between 14,500 and 15,500 points in the sessions ahead, said Higashida.

But the outlook further ahead was better.

"If the US economy slows down at its current pace, corporate earnings will continue to be capped but (Federal Reserve) monetary policy is likely to be eased.

"Investors would then have high hopes for a successful soft landing by the US economy."

Major downside factors for the Nasdaq were easing, said Kazunori Jinnai, deputy general equity manager at Daiwa SB Capital Markets.

"The Nasdaq has been weak due to three major factors: weak sales of personal computers, slowing sales of semiconductors and slowing investment in communications infrastructure," he said.

"But the major hi-tech companies have finished releasing disappointing earnings, and all the negative factors have come out."

The Nasdaq was likely to start recovering going into the US presidential election on November 7 and the next Federal Reserve meeting a week later, Jinnai said.

"The Nikkei should hover around 15,000 next week as the Nasdaq starts to pick up," he said.

"And next week we should see some strong corporate earnings figures in Japan, and that should help raise the Nikkei."

One focus for Tokyo will be next Tuesday's release by the Bank of Japan (BoJ) of a new monthly report which is set to include an inflation forecast for the first time.

The BoJ has made it clear it wants to tighten interest rates again, after abandoning its zero-rate policy in August, despite widespread signs that prices are still falling, said Commerz Securities economist Ron Bevacqua.

"If the markets suspect that the BoJ is trying to make the facts fit its own policy bias rather than the other way around, they will begin to distrust the BoJ and its policy decisions," Bevacqua said in a report.

But the central bank is unlikely to change rates for at least another six months, he added.

In the past week, Sony slumped 900 yen or 8.5 percent to 9,570.

Japan's biggest computer maker Fujitsu lost 387 yen to 1,973, while top Internet investor Softbank Corp. dropped 1,180 to 7,380.

Nippon Telegraph and Telephone Corp. bucked the trend to rise 40,000 yen to 1.05 million.


-- Carl Jenkins (Somewherepress@aol.com), October 27, 2000

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