By Mai Iida Tokyo, June 18 (BridgeNews) - Japanese shares ended the morning session slightly lower Monday as networking issues broadly lost ground on concerns over the industry profit outlook following profit warnings from Nortel Networks. Meanwhile, selected defensive issues gained ground giving the downside support to the market. The Nikkei 225 Stock Average fell 20.80 points, or 0.2%, to 12,769.58.
The Nikkei 225 June futures contract closed down 20 points at 12,780 on the Osaka Securities Exchange. Morning volume on the first section of the Tokyo Stock Exchange (TSE) totaled an estimated 272.8 million shares. The Tokyo Stock Price Index (TOPIX) fell 0.2%, or 2.20 points to 1,263.12, with losers exceeding gainers 636 to 594 and 197 issues unchanged on the First Section of the Tokyo Stock Exchange.
"WDM (wavelength division multiplexing) related issues were broadly pressured by profit warnings from networking giant Nortel Networks," said Koichi Murayama, investment information department manager at Retela Crea Securities Co. The nation's major electric wires and cables maker The Furukawa Electric Co. fell 2.6% to 1013 yen after Nikko Salomon Smith Barney revised lower its target share price from 1200 yen to 1000 yen. Nippon Sheet Glass Co. was also lower 6.9% to 839 yen on a heel of Nikko Salomon Smith Barney's decision cutting the target price from 900 yen to 700 yen.
Fujikura Ltd. skid 1.8% to 748 yen and Hitachi Cable Ltd. shed 1.5% to 666 yen. However, the downside was firm as defensive issues such as electrical power, gas and oil issues were picked up on dips, with Tokyo Electric Power Co. up 1.0% to 3190 yen and Tohoku Electric Power Co. higher 2.4% to 1911 yen. Cosmo Oil Co. jumped 10.3% to 353 yen and Showa Shell Sekiyu KK surged 5.3% to 796 yen.
Selected high tech issues also captured some buying following recent declines, although earnings concerns about high tech issues are still lingering, Murayama said. Fujitsu Ltd. was up 0.2% to 1380 yen, NEC Corp. was up 2.3% to 1770 yen while Sony Corp. was down 1.0% to 8690 yen, and Hitachi Ltd. lost 0.4% to 1189 yen.
Banks posted modest gains on short covering in reaction to recent heavy sell-off. The upward move was also supported by the Nihon Keizai Shimbun report Saturday the head of a tax panel under the ruling Liberal Democratic Party indicated to open tax breaks on shares sold to a proposed entity that would absorb portfolio stocks unloaded by banks, traders said. Hideyuki Aizawa, dominant Liberal Democratic Party tax committee chairman said that LDP policy-makers wanted to come up with some tax merit that would encourage banks to transfer shares to the stock buying body instead of releasing them into the stock market causing downward pressure, the paper said.
Tetsuyuki Kono, general manager of investment information department at Tsubasa Securities Co. said if many banks use the entity in a way to unwind their cross shareholdings, that could work effectively to avoid negative impact on the demand and supply picture for the near term. But strong rally of bank issues is not expected due to lingering concerns over the bad loan problems and economy outlook. Mizuho Holdings Inc. rose 1.0% to 500,000 yen and Mitsubishi Tokyo Financial Group advanced 1.3% to 1,010,000 yen.