Japan's Nikkei stock average sank more than two percent by mid-afternoon on Thursday as selling by foreign investors on shares in banks and other recent gainers triggered further waves of profit-taking. Arbitrage selling in reaction to a steep fall in equity index futures also pressured the cash market, although media reports that another two Japanese civilians had been kidnapped in Iraq may have been used as an excuse for hedge sales, traders said. As of 0403 GMT, the Nikkei <.N225> was down 2.34 percent at 11,815.24, off an earlier low of 11,770.40. The broader TOPIX index <.TOPX> gave up 1.97 percent to 1,193.93.
Japanese media reported on Thursday that two more Japanese civilians had been kidnapped in Iraq, in addition to three taken hostage by armed militants last week. Italy said on Thursday that one of four Italians taken captive there had been killed. "The market was already overbought and the news that another two Japanese had been captured fueled concerns about global security, spurring hedge sales," said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities. Soon after the opening, the Nikkei had hit a 32-month intraday high of 12,189.98, bolstered by optimism on the country's economy and continuing signs of a pick-up in corporate earnings.
Resona Holdings <8308.T>, Japan's fifth-biggest banking group and the most active issue by value, was down 1.32 percent at 225 yen. Resona had risen more than 40 percent this month. Bigger rival Mizuho Financial Group <8411.T> slumped 3.09 percent to 533,000 yen. Real estate developer Mitsubishi Estate Co <8802.T> lost 5.22 percent to 1,433 yen and rival Mitsui Fudosan Co <8801.T> slid 4.35 percent to 1,320. Major builder Kajima Corp <1812.T> skidded 3.95 percent to 413 yen. Nippon Steel Corp <5401.T>, Japan's biggest steel maker, was down 1.92 percent at 256 yen a day after it hit a four-year intraday high.///