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WRAPUP 1-Nikkei plunge, Fed fears drag Asian stocks lower
May 30, 2013 / 9:03 AM / 4 years ago

WRAPUP 1-Nikkei plunge, Fed fears drag Asian stocks lower

* Nikkei extends losses, tumbles to 5-week low
    * Concerns over Fed unwinding stimulus weigh
    * High-dividend paying stocks suffer the most

    By Ayai Tomisawa and Tomo Uetake
    TOKYO, May 30 (Reuters) - Japan's Nikkei share average dived
5.2 percent on Thursday, leading a tumble in Asian stocks as
concerns about the U.S. Federal Reserve scaling back its huge
stimulus programme in the next few months rattled investors.
    The plunge in the Nikkei accelerated in the
afternoon, extending the benchmark's losses to nearly 15 percent
since it hit a 5-1/2-year high on May 23, putting it well into
"overbought" territory and leaving it ripe for profit-taking. It
ended 7.3 percent lower the same day.
    Fed Chairman Ben Bernanke said last week that the U.S.
central bank could decide whether to reduce its $85 billion in
asset purchases every month at one of its "next few meetings,"
depending on economic data. 
    His comments pushed up Treasury yields to 13-month highs on
Wednesday, prompting investors to cut back on high-dividend
paying stocks in the United States and Asia. Singapore's real
estate investment trust (REIT) index sagged a
further 2.8 percent on Thursday after shedding 2.8 percent in
the previous session.
    "People are worried that a winding down of quantitative
easing could end the generous supply of money, leading to a
surge in interest rates and a downturn in stock prices and
economies," Ryoji Musha, president of Musha Research in Japan,
wrote in a report.
    The spread between the dividend yield for Japan's Topix
index and the yield on the benchmark 10-year Japanese
government bond touched 0.654 percent, its lowest since March
2011, on May 22, the day before last week's selloff, according
to Thomson Reuters Datastream.
    It stood at 0.735 percent on Wednesday, the latest figure
    Asian shares measured by the MSCI Asia-Pacific outside of
Japan slipped 0.5 percent on Thursday, with the
Singapore benchmark down 1.1 percent, Taiwan shares
 off 1.1 percent and Philippine shares shedding
3.8 percent.
    High-yielding counters also fell in Hong Kong and Australia.
    The Nikkei ended at its lowest since April 22, with index
heavyweight Fast Retailing, the owner of casual fashion
chain Uniqlo, sinking 11 percent.
    "Hedge fund traders who want to drag down Nikkei futures
would sell Fast Retailing as it has a big contribution to the
index," said a dealer at a Japanese securities firm.
    "It's algorithm trade. As soon as the market receives a
signal that the stock is falling, other traders likely follow
suit. That's how speculators pull down the market, and Fast
Retailing is one of the stocks used as a tool in such trade."
    The dealer added investors would buy Fast Retailing, which
has the biggest weighting in the Nikkei, when they try to push
the Nikkei higher. 
    Tokyo's Nikkei is down 2 percent this month, on track to
snap a nine-month winning streak, its longest such run since
1993. Before last Thursday's selloff began, it was heading for a
10th straight month of gains, which would be its longest winning
run since 1972.
    Despite the recent selloff, the Nikkei is still up 10
percent since April 4, when the Bank of Japan announced a
sweeping monetary expansion campaign to eliminate years of
deflation and revive growth, and has risen 31 percent this year.
    The magnitude of position reshuffling may be greater for the
Nikkei, which has outpaced other Asian bourses by far so far
this year. Benchmark indexes in Indonesia and the
Philippines, both of which hit record highs this year,
have shown 19 percent and 20 percent growth this year,
    "Those who said Japanese stocks are appealing when the
Nikkei was 9,000 are still saying that they are attractive even
when the index was trading at 15,000. The market has become numb
about its own valuations," said Chisato Haganuma, chief
strategist at Mitsubishi UFJ Morgan Stanley Securities.
    "People can get increasingly optimistic about the bull
market, but as soon as the market started declining, they get
scared to put buy orders," he said.
    Japanese equities carry a 12-month forward price-to-earnings
ratio of 16.3, up from 13.9 at the end of 2012 and almost level
with its 10-year average of 16.4, data from Datastream showed.
    That compared to 14.9 for Singapore shares and 14.8 for
Taiwan stocks.
    Chang Chiou Yi, regional strategist for ASEAN at CIMB
Research, said: "These are unlikely to lead to a sharp rotation
or underperformance in ASEAN. especially within Asia. The
Philippines has indeed run up quite a lot and may be fully
priced in for now, but the longer term outlook remains positive
so not major shift in investment view."

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