Nikkei average falls

The Nikkei stock average fell on Tuesday, but closed off its intra-day lows, as foreign investors continued to pull back from large-cap names with financials and commodity trading houses among the weakest performers on the day. Foreigners have steadily cut exposure to Japanese shares with Goldman Sachs estimating that investors outside Japan have sold roughly one-third of what they bought over the eleven months between September last year to July this year.
With the Nikkei close to testing its lowest levels since the March earthquake and several large-caps trading at multi-year lows, some domestic institutions also appear to be shifting out of equities. "Current low share prices would seem to offer good buying opportunities, but in addition to the persistent selling by foreigners, some domestic pension funds are rebalancing and shifting out of stocks and into bonds," said Kenichi Hirano, operating officer at Tachibana Securities.
Expectations that the Bank of Japan will step into the market to buy exchange-traded funds as part of its asset-buying programme are lending some support, market participants said. The BOJ bought exchange-traded funds worth 22.3 billion yen ($290 million) on Monday in its first ETF purchases since September 26, when it also bought that amount. The Nikkei fell 1.1 percent to 8,456.12, after falling as low as 8,359.24. It remained above its intraday low of 8,227 set on March 15 in the wake of the March 11 earthquake.
The broader Topix index declined 1.5 percent to 736.18. Goldman's team of Japan strategists led by Kathy Matsui cut their 12-month forecast on the Topix by 8 percent to 870, although that still implies upside of 15 percent from current levels.
But they added that if there was a global recession, earnings per share for the index could fall by 19 percent in the year ending March 2013 and Topix could break to new post-bubble lows. Top Japanese automakers Toyota Motor and Honda Motor fell 2.5 percent and 2.8 percent respectively after both reported declining sales in the US on Tuesday as both lost more ground to American car makers.
Trading company Mitsubishi Corp was the heaviest-traded share by turnover, falling 5.7 percent to 1,429 yen. Mitsubishi UFJ shares fell 3.8 percent to 331 yen. The Japanese lender issued a statement late on Monday reiterating its commitment to Morgan Stanley. Shares of brokerage companies Nomura Holdings and Daiwa Securities fell 2.6 percent and 4.2 percent respectively.
Nomura shares hit their lowest point since at least 1974, according to a spokesman at the brokerage, while Daiwa shares fell to their lowest in at least 27 years, according to Thomson Reuters data. Volume was in-line with levels seen over the past week with 2.1 billion shares traded on the Tokyo Stock Exchange's main board, slightly above Monday's 1.9 billion shares. About 4 shares declined for every one that rose.