Nikkei falls on soft PMI, weak U.S. shares trigger profit-taking

* Nikkei has risen 13 pct this year, 5 pct this month * Profit-taking hits, but market may stay resilient until stocks go ex-dividend – traders * GS Yuasa dives after cutting earnings forecast By Ayai Tomisawa TOKYO, March 24 (Reuters) – Japan’s Nikkei share average fell on Tuesday morning, hit by a weak survey out of China and fall in U.S. shares, but continuing ongoing expectations of better returns for holders of Japanese shares limited losses and supported overall sentiment.

The Nikkei dropped 0.3 percent to 19,703.80 in mid-morning trade, staying close to a 15-year high of 19,778.60 hit on Monday.

Analysts said that profit-taking was expected at this point, with the Nikkei gaining 13 percent since this year and adding 5 percent so far this month, reflecting hopes of recovering Japanese corporate earnings and better shareholder returns.

“The market is sensitive to good news and is numb to bad news now, but it does seem overbought in a short period of time so profit-taking is natural,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Fund managers said that such stocks as JGC Corp, Misumi Group Inc and Nippon Paint Holdings Co were prone to profit-taking by foreign investors due to their recent rises. JGC fell 5.7 percent, while Misumi shed 4.8 percent and Nippon Paint dropped 3.5 percent.

Activity in China’s factory sector dipped to a 11-month low in March as new orders shrank, a private survey showed.

But others say that the Japanese market may stay somewhat resilient until this Thursday, when most of the stocks go ex-dividend.

“Investors have never been more focused on shareholder returns. After this day, there may be some profit-taking but until then, the market may stay strong,” said Naoki Fujiwara, a fund manager at Shinkin Asset Management.

He said that such changes as Japan’s corporate governance code have triggered buying of foreign investors.

Introduced as part of Prime Minister Shinzo Abe’s growth strategy, the code calls on listed companies to have two or more independent directors and to boost returns on equity that are lower in Japan than in the United States and Europe.

GS Yuasa Corp tumbled as much as 5.8 percent to a more than two-week low after cutting its earnings forecast.

Bucking the weakness, Eisai Co, which jumped 21 percent on Monday, soared 6 percent, on ongoing hopes for the effectiveness of its drug to treat Alzheimer’s disease.

The broader Topix dropped 0.5 percent to 1,584.78 and the JPX-Nikkei Index 400 fell 0.4 percent to 14,403.49.

Nikkei Futures

nikkeifutures.org@imediaone.com

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