Tokyo Market: Stronger yen will hit exports
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Your support makes all the difference.JAPANESE stocks may fall to a two-week low this week amid concern that a stronger yen and weaker global markets will batter exporters' profits.
Still, losses by the likes of Sony and Honda Motor Co are likely to be offset by gains by drugmakers and food companies as fund managers reshuffle their portfolios to include more recession-resistant issues.
Japanese bonds are likely to rise again as investors seek a safe place for their money. Last week, the No 203 Japanese benchmark government bond rose 185 yen per 50,000-yen bond, pushing its yield down 4 basis points to 0.82 per cent.
The dollar fell four days out of five last week, hitting a 10-day low on Friday, on concern that Brazil's plan to trim its deficit may slow the US economy. That, in turn, would hurt Japanese exports. The US currency fell as low as 115.19 yen on Friday - the weakest since 20 October - before clawing back above 116.
Investors say the Nikkei 225 stock index could slump below 13,000, a level it last plumbed on 15 October. The index fell 580.19 points last week, or 4.1 per cent, to 13,564.51. The broader Topix index dropped 32.55 points, or 3 per cent, to 1035.60. Electronics companies and automakers will likely drag it down as investors wait for more bad news.
Sony and Japan's big five chipmakers provided ample evidence last week that exporters' profits have been dealt a double blow by the rising yen and falling prices. Sony's shares fell to their lowest since January 1997 after the company slashed its full-year profit forecast by 21 per cent, partially in response to the yen's 19 per cent gain against the dollar over the past three months; its woes may be echoed this week by Citizen Watch Co and Mitsubishi Motors Co.
Pessimism over the prospects of Mitsubishi Motors, Japan's fourth-largest automaker, and its competitors may deepen if figures show that Japanese consumers bought fewer cars in October. Domestic car sales have fallen 14 per cent in the year through September, according to the Japan Automobile Dealers Association.
Steelmakers may join the retreat as industry leaders report their earnings. Fund managers expect Nippon Steel Corp, NKK Corp, and Kawasaki Steel Corp to confirm their fears that profits already dragged down by Japan's deepest post-war recession will be further undermined by eroding investments. Copyright: IOS & Bloomberg
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