TOKYO: The Nikkei share average tumbled 3.7 percent to a six-week low on Monday as weak Chinese factory activity and concern that the US Federal Reserve may scale back stimulus earlier than expected weighed on investors.
The Nikkei dropped 512.72 points to 13,261.82, the lowest closing level since April 18.
The index has now fallen 16.8 percent from a 5-1/2 year peak hit last month, but it is still up 7.3 percent since the Bank of Japan's radical monetary expansion campaign was announced on April 4 and has risen 28 percent so far this year.
The market fell after global index rebalancing and profit-taking hit Wall Street, adding to a sell-off triggered by worries that the US Federal Reserve may roll back stimulus and by slowing growth in China.
Market analysts said the downard correction probably had further to run, and investors are focused on whether the index will fall below 13,000, a level last seen before the central bank aggressively eased monetary policy under the new leadership headed by Governor Haruhiko Kuroda.
"The index being below that level is a 'pre-Kuroda' level... I don't think it will stay below 13,000. That's a level where you can place buy orders with your eyes closed," said Shun Maruyama, chief Japan equity strategist at BNP Paribas, adding that a Nikkei below 13,000 would be cheap.
"Right now, investors are repositioning their stances. Their positions were based on the conditions that the Fed will be cutting its stimulus in 2014 and Japan's long-term interest rate would not rise for a while... but that does not seem to be the case any more," Maruyama said.
On Monday, Chinese factory activity shrank for the first time in seven months in May as both domestic and external demand weakened, while activity in the services sector also slipped, adding to the negative sentiment in Japan, one of its largest trading partners.
The Topix fell 3.4 percent to 1,096.95, with all of its 33 sub-sectors in negative territory. Volume was relatively low, with 4.09 billion shares changing hands, compared with last month's daily average volume of 4.67 billion shares.
Some market participants said there was little evidence of panic selling by foreign investors, and there were expectations for a quick rebound and confidence in the broader fundamentals, though any delay in the recovery could change perceptions.
Comments
Comments are closed.