Nikkei Stabilises After Selloff, Capped by Sales Tax Concern

Bareksa.com -  Japan's Nikkei share average was little changed on Monday morning as concerns over possible slowdown in consumption after a tax hike in April limited investors' appetite.  

The benchmark Nikkei eased 0.1 percent to 15,083.84, stabilising after sliding 1.4 percent, its biggest one-day drop in six weeks, in the previous session.  

"The data out for the current quarter are suggesting actually there has been a significant slowdown in consumer spending after the consumption tax hike," said Stefan Worrall, director of equity cash sales at Credit Suisse in Tokyo.  

"Friday's selloff was caused by some concerns about macro (economy) and those concerns are likely to continue to be a focus this week, particularly with retail sector earnings beginning to come out."  

One example was clothing store chain Shimamura, which fell 1.8 percent after the retailer said on Friday its profits tumbled in the three months to May 20, as the company did not pass on higher sales tax to consumers.  

Retailers, including Seven & i Holdings, Aeon Mall and Ryohin Keikaku are scheduled to announce March-May earnings this week, which will provide investors an early indication on the impact of the sales tax hike.  

Traders were also wary of the possibility that buying by public pension funds, a major driving force behind the market's rally in the last two months, may run out of steam.  

Reuters reported last week that three Japanese "semi-public" pension funds aggressively bought Tokyo stocks in recent weeks.   

"We suspect that public funds are responsible for the lion's share of recent strong buying by trust banks," said Masatoshi Kikuchi, pan-Asia chief equity strategist at Mizuho Securities, referring to heavy buying by trust banks, which manage a large proportion of public pension funds, since May.  

Such concerns kept main investors on the sidelines, preventing Japanese shares from gaining on rises in Wall Street shares on Friday.  

Shares in mobile virtual network operators (MVNOs) were among the most-traded on the news that the government is set to require Japanese mobile phone carriers to remove carrier-specific restrictions, or SIM locks, on handsets next year.  

Japan Communications surged 18.5 percent to the day's limit, while Freebit climbed 21.9 percent and Wireless Gate gained 13.3 percent.  

Non-bank financials were among the top performers, rising 0.6 percent and extending their solid gains this quarter on expectations of deregulation on the limit they can charge borrowers.    

Aiful jumped 8.8 percent, making it the most-traded stocks on the Tokyo Stock Exchange's main board.  

The broader Topix fell 0.1 percent to 1,251.97, while the JPX-Nikkei Index 400 shed 0.1 percent to 11,379.06.  

On the quarter, Japanese shares look to set to post small gains after a sharp fall in January-March. The Nikkei was up 1.7 percent so far this quarter.  

The market was little affected by Japan's industrial production reading for May, announced just before the opening bell, as the modest rebound from a slowdown after an April sales tax hike came as no big surprise. (Source : Reuters)