Japan's Nikkei stock average hit a nearly three-month closing low in thin trade on Monday, sliding 0.8 percent on earnings concerns after Komatsu Corp issued a profit warning and the dollar pared gains against the yen, sinking exporters.
The closing low of 7,682.14 was the lowest since Oct. 28, when the benchmark Nikkei briefly fell to an intraday low of 6,994.90 — a 26-year low.
Monday's slide was slowed as investors snapped up battered shipping firms on the view they had been oversold and hopes that Chinese imports may be picking up, while defensive shares rose.
But the biggest drag on shares came from fears about earnings as Japan's corporate results season moves into high gear this week, with Sony Corp due to announce on Thursday after warning of massive losses last week.
Concerns about earnings in the United States, with some 137 companies in the S&P 500 and 12 Dow components set to announce this week, will also keep buying limited, market players said. "There are places that, like Sony and Komatsu, suddenly slashed their forecasts, and we have U.S. earnings as well," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
"This is not the kind of atmosphere in which you want to buy actively."
Though shares were bolstered earlier on Monday as the dollar advanced against the yen, euro and sterling, with the latter two under pressure on growing economic worries in the region, the U.S. currency later pared its gains.
At 0608 GMT, the dollar was trading at 88.78 yen, nearly flat but off last week's low of 87.10, the dollar's lowest since July 1995.
Investors welcome a softer yen as it boosts exporter profits when repatriated.
The benchmark Nikkei shed 63.11 points in a day of choppy trade, with many Asian markets closed due to the Lunar New Year and Australia and India closed for national holidays. The broader Topix lost 0.7 percent to 768.28.
"This week we have one set of results after another, and Komatsu's warning has scared investors," said Takashi Ushio, head of the investment strategy division at Marusan Securities.
"We know this results season will be bad, and this is inhibiting buying."
SHADOWED BY EARNINGS
Earth-moving and construction machinery maker Komatsu, which competes with world No.1 Caterpillar Inc, dropped 4.7 percent to 909 yen after slashing its profit forecast for this year by a third on Friday to well below the market consensus, blaming a sudden slump in global demand.
Exporters dragged the Nikkei lower as the dollar sagged in later trade, with Canon Inc down 3.6 percent and Honda Motor Co losing 1.8 percent. Sony shed 3.1 percent.
But the bad news was countered by Kyocera, which was off earlier highs but still gained 2.3 percent to 5,800 yen after financial newspaper Barron's said the electronics parts maker is in an excellent position to benefit from an economic recovery, as it has strong positions in such businesses as solar panels and cellphones.
"Kyocera could well be in good shape because it maintains a good balance between different businesses, with its solar batteries likely to be a key earner as the U.S. emphasises clean energy," said Marusan's Ushio.
On Monday, Shin-Etsu Chemical Co, the world's biggest maker of wafers and PVC, posted a 15 percent drop in quarterly profit and declined to disclose an annual profit outlook due to rapidly declining demand amid the global recession.
Shares in the company, though, edged up 0.8 percent to 3,940 yen.
Mitsui O.S.K. Lines rose 3.8 percent to 551 yen after the Baltic Dry Exchange, a key freight index, gained 3.7 percent on Friday. Nippon Yusen, Japan's largest shipping firm, gained 1.3 percent to 463 yen.
"Shipping firms seemed to have bottomed out at the end of last year, and signs of growing China import demand has kept the Baltic Dry Exchange supported recently, so we can look for some gains," said Chibagin Asset Management's Osakabe.
Defensive shares, popular in the face of economic turmoil overseas, also provided support.
Asahi Breweries Ltd gained 2.8 percent to 1,347 yen after Japan's second-biggest beer maker said it would buy a 19.99 percent stake in China's Tsingtao Brewery from Anheuser-Busch InBev NV for $667 million.
Trade was light on the Tokyo exchange's first section, with 1.62 billion shares changing hands, compared with last week's daily average of 1.77 billion.
