Tokyo stocks rebounded from a three-month low to close up on Tuesday as investors bought back bank shares like Mizuho on bargain-hunting, but traders said more stop-loss selling was likely to push the market down again.
Drug makers were also lifted after Fujisawa Pharmaceutical Co said on Tuesday that it was talking to various companies, including Yamanouchi Pharmaceutical Co, on possible tie-ups.
The merger talks spurred buying in the pharmaceutical sector, which has been one of the market's few laggards, having fallen more than three percent this year.
But traders said the market may test lower levels this week as many individual investors who bought shares on margin are forced to close their positions as the value of their holdings drops.
"Individual investors bought shares when the market hit its highs but that has wound up leaving them caught in a trap," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co Ltd.
"There were also new risks like terrorist attacks," he added.
The Nikkei ended up 1.13 percent at 9,897.05 after falling as low as 9,678.78 in the morning. The benchmark sank 3.74 percent on Monday, its biggest one-day drop in a month and marking its first close below 10,000 since August.
The broader TOPIX index also recouped earlier losses to end up 0.16 percent at 973.44.
After Monday's rough ride, investors returned to bank shares. Mizuho Financial Group Inc climbed 4.67 percent to 224,000 yen, partially recovering from a 10.8 percent fall the previous day.
UFJ Holdings Inc jumped 9.54 percent to 402,000 yen, after tumbling 9.4 percent on Monday.
Regional banks were supported after rating agency Moody's Service said on Monday it may upgrade the credit ratings of six regional Japanese banks, including Ashikaga Financial Group Inc and Hokkaido Bank Ltd
Ashikaga Financial rose 6.32 percent to 101 yen while Hokkaido Bank ended unchanged at 134 yen.
Technology shares were firm, with Sony Corp up 1.86 percent at 3,840 yen and Advantest Corp rising 5.72 percent to 7,950 yen.
Still, selling was widespread and decliners outpaced gainers, 981 to 465.
Trading volume picked up a notch, with 1.25 billion shares changing hands on the first section, compared with 1.17 billion on Monday.
NEXT SUPPORT
Traders said the market could return to negative territory this week due to stop-loss selling from individual investors and a lack of buying by foreign investors who will close their books by next month and are unwilling to open new positions.
Takahiko Murai, general manager of equities at Nozomi Securities, said the Nikkei could briefly drop to the 9,200 level, or around its 200-day moving average of 9,245.96 as of Tuesday.
It was also around that level -- 9,265.56 in August -- that the Nikkei took off on its most recent rally.
But Murai added that further drops in the market could force more individual investors to cut losses.
"Once they start to fall, selling feeds on itself," he said.
Monday's dive prompted some government officials to voice concern about the potential impact of the recent stock market drop on the Japanese economy.
Trade Minister Shoichi Nakagawa said on Tuesday morning that the recent decline in Tokyo shares would have a negative impact on the Japanese economy.
Akino of Ichiyoshi Investment said that based on this business year's earnings forecasts for Nikkei 225 companies, earnings per share (EPS) stands at about 540 yen and the current Nikkei level was about 18 times that EPS.
"I don't think the Nikkei is trading at a premium," he said. "Given Japan's economic fundamentals, 9,800 yen is an appropriate level," he added.
Elsewhere, Japan Telecom, owned two-thirds by Britain's Vodafone Group Plc, ended up 1.83 percent at 333,000 yen ahead of its earnings announcement.
Japan Telecom issued a profit warning after the market closed, forecasting a group net loss of 104 billion yen for the year to March, hit by a special loss from the sale of its fixed-line operations.
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Drug makers were also lifted after Fujisawa Pharmaceutical Co said on Tuesday that it was talking to various companies, including Yamanouchi Pharmaceutical Co, on possible tie-ups.
The merger talks spurred buying in the pharmaceutical sector, which has been one of the market's few laggards, having fallen more than three percent this year.
But traders said the market may test lower levels this week as many individual investors who bought shares on margin are forced to close their positions as the value of their holdings drops.
"Individual investors bought shares when the market hit its highs but that has wound up leaving them caught in a trap," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co Ltd.
"There were also new risks like terrorist attacks," he added.
The Nikkei ended up 1.13 percent at 9,897.05 after falling as low as 9,678.78 in the morning. The benchmark sank 3.74 percent on Monday, its biggest one-day drop in a month and marking its first close below 10,000 since August.
The broader TOPIX index also recouped earlier losses to end up 0.16 percent at 973.44.
After Monday's rough ride, investors returned to bank shares. Mizuho Financial Group Inc climbed 4.67 percent to 224,000 yen, partially recovering from a 10.8 percent fall the previous day.
UFJ Holdings Inc jumped 9.54 percent to 402,000 yen, after tumbling 9.4 percent on Monday.
Regional banks were supported after rating agency Moody's Service said on Monday it may upgrade the credit ratings of six regional Japanese banks, including Ashikaga Financial Group Inc and Hokkaido Bank Ltd
Ashikaga Financial rose 6.32 percent to 101 yen while Hokkaido Bank ended unchanged at 134 yen.
Technology shares were firm, with Sony Corp up 1.86 percent at 3,840 yen and Advantest Corp rising 5.72 percent to 7,950 yen.
Still, selling was widespread and decliners outpaced gainers, 981 to 465.
Trading volume picked up a notch, with 1.25 billion shares changing hands on the first section, compared with 1.17 billion on Monday.
NEXT SUPPORT
Traders said the market could return to negative territory this week due to stop-loss selling from individual investors and a lack of buying by foreign investors who will close their books by next month and are unwilling to open new positions.
Takahiko Murai, general manager of equities at Nozomi Securities, said the Nikkei could briefly drop to the 9,200 level, or around its 200-day moving average of 9,245.96 as of Tuesday.
It was also around that level -- 9,265.56 in August -- that the Nikkei took off on its most recent rally.
But Murai added that further drops in the market could force more individual investors to cut losses.
"Once they start to fall, selling feeds on itself," he said.
Monday's dive prompted some government officials to voice concern about the potential impact of the recent stock market drop on the Japanese economy.
Trade Minister Shoichi Nakagawa said on Tuesday morning that the recent decline in Tokyo shares would have a negative impact on the Japanese economy.
Akino of Ichiyoshi Investment said that based on this business year's earnings forecasts for Nikkei 225 companies, earnings per share (EPS) stands at about 540 yen and the current Nikkei level was about 18 times that EPS.
"I don't think the Nikkei is trading at a premium," he said. "Given Japan's economic fundamentals, 9,800 yen is an appropriate level," he added.
Elsewhere, Japan Telecom, owned two-thirds by Britain's Vodafone Group Plc, ended up 1.83 percent at 333,000 yen ahead of its earnings announcement.
Japan Telecom issued a profit warning after the market closed, forecasting a group net loss of 104 billion yen for the year to March, hit by a special loss from the sale of its fixed-line operations.
Reuters Terminal users can see latest rates by double-clicking on : Chicago N225 data Dow Jones industrial average DJI> Nasdaq Composite Index IXIC> Standard & Poor's 500 Index SPX> Dollar/yen Reuters Terminal users can see other related news and rates by double-clicking on : All Nikkei indices NIKKEI> All shares listed on Nikkei-225 N225> N225 index
N300 index
N300> Top 20 by volume
AV.Top 20 by value
AM.T> Total volume
TV.Total value
VM.T> All TSE simple avg All TSE weighted avg TSEB> Top 20 gainers by pct PG.Top 20 losers by pct PL.T> Top 20 net gainers NG.Top 20 net losers NL.T> Osaka N225 data
TOPIX futures data TOPIX index
TOPIX sector data TSEK> RELATED NEWS AND OTHER TOPICS : Active Japanese stocks Weekly Tokyo preview T/O> Japan IPO news
All Equity news Japan economic Japan Diary
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