Japan Stocks Sink On Abe Speech, Lead Asia Losses

Japanese stocks swooned in volatile trading action Wednesday after Prime Minister Shinzo Abe’s blueprint to spur long-term economic growth fell short of expectations.

Most other regional markets declined after a weak lead from Wall Street overnight that kept alive concerns the Federal Reserve may taper its bond purchases, with Australian stocks sliding after the nation’s first-quarter growth came in below estimates.

In Japan, the Nikkei Stock Average  rose more than 1% as Abe began his much-anticipated speech, but staged a swift reversal within minutes to end the session 3.8% lower. The dollar also charted a similarly volatile course, rising as high as ¥100.45 before sliding back to ¥99.57.

The reversal came as Abe’s blueprint revealed plans to attract foreign funds, boost investment and wages, and revamp the structure of agricultural land. He also announced a proposal to allow the nation’s massive pension funds to increase their equity allocation.

“The market will be looking to hear more about his comments urging Japan’s public pension funds to increase their investments in equities and overseas assets,” said Stan Shamu, a strategist at IG Markets.

“The comments made by Abe today were not really a game-changer and disappointed a market which seems to have been positioned for a USD/JPY and Nikkei rally,” he added.

Power utilities dived after Abe pledged to restart shuttered nuclear plants in the country after ensuring their safety. He also announced plans to liberalize the retail electricity market, separate the distribution and transmission businesses, and boost capital spending in utilities.

Tokyo Electric Power Co.   plunged 16.3%, Tohoku Electric Power Co.   slumped 9.1% and Kansai Electric Power Co.  plummeted 9.2%.

Several exporters pulled back on the yen’s strength. Mitsubishi Motors Corp.   skidded 5.7%, Fast Retailing Co.   sank 9.5%, Trend Micro Inc.   lost 8.2% and Sharp Corp.    gave up 7.3%.

Sony Corp.  lost 5%, failing to benefit from a Nikkei newspaper report that it plans to begin selling e-books for Apple Inc.’s  iPad and iPhone in Japan, starting as early as the second half of the current financial year.

Other regional markets

Elsewhere in the region, the Shanghai Composite eased 0.3%, Hong Kong’s Hang Seng Index  fell 1.2%, and South Korea’s Kospi  gave up 1.3%.

The losses came in the wake of an overnight decline on Wall Street, amid lingering worries related to tapering of the Fed’s bond purchases.

“U.S. Fed tapering fears are likely to be felt for several months, and this is likely to see ebbs and flows in markets,” said Matthew Sherwood, head of investment market research at Perpetual.

The weak tone in Hong Kong kept the Hang Seng Index on course for its fifth loss in six trading days.

The market found little support after data from HSBC showed activity in China’s services sector remained at sluggish levels, although the headline Purchasing Managers’ Index edged up to 51.2 in May from 51.1 in April.

“A soft patch in manufacturing growth continues to weigh on this industry and adds more downside risks to China’s growth” in the second quarter, HSBC’s chief China economist Hongbin Qu said in an accompanying statement.

However, “improving property market and Beijing’s renewed effort on expanding [value-added tax] reform nationwide could lend some support for the service sector’s future development,” Qu added.

Property stocks led the losses, with Cheung Kong Holdings Ltd.   sliding 3.3% and Hang Lung Properties Ltd.   falling 2.9% in Hong Kong. Shares of Gemdale Corp.  lost 1.4% in Shanghai and China Vanke Co. fell 0.9% in Shenzhen.

Meanwhile, Australia’s S&P/ASX 200  fell 1.1%, extending losses in afternoon trading after data showed the domestic economy expanded at a slower-than-expected rate during the January-March quarter.

“While growth is a touch on the soft side, the key point is that Australia has notched up 22 consecutive years of growth. It is an achievement to be celebrated,” CommSec economist Savanth Sebastian wrote to clients.

Commonwealth Bank of Australia   was off 1%, and Westpac Banking Corp. fell 2.3%.

Shares of Fortescue Metals Group Ltd. rose 2.6% after an increase in iron-ore prices.

South Korean exporters also lost ground on weak cues from Wall Street, with Hyundai Motor Co.   and Kia Motors Corp.   each retreating 2.1%.

Samsung Electronics Co.  fell 0.7% in a downbeat market, although the U.S. International Trade Commission ruled in favor of the company, and against Apple, in a patent dispute affecting older iPhone and iPad models.

Marketwatch