US-China trade tensions hit Japanese robot, construction stocks
16/05/2019 06:30
By Ayai Tomisawa
TOKYO, May 16 (Reuters) - Shares of Japanese automation
machinery makers, construction firms and suppliers to Apple Inc.
have borne the brunt of recent selling in the country's stock
market after an escalation in U.S.-Sino trade tensions.
The Nikkei index .N225 has fallen on 7 out of the last
eight trading sessions amid a global market rout.
The slide came after a setback in the long-running trade
war, when U.S. President Donald Trump hiked tariffs on $200
billion worth of Chinese goods, saying China reneged on
commitments made earlier during negotiations. China retaliated
on Monday.
Adding to the pressure on Asian equity markets, surprisingly
weak Chinese data on Wednesday pointed to slower growth in the
world's second-largest economy, a big market for
Japan. urn:newsml:reuters.com:*:nL4N22R1OC
Shares of Fanuc Corp 6954.T , which makes industrial
robots, have tumbled 8.5% so far this month.
The company saw a significant drop in its China sales for
the fiscal year ended March 2019. China now accounts 19% of its
overall sales, down from 30% a year ago.
Shares of servo motor maker Yaskawa Electric 6506.T have
dropped 9.2%, while Tokyo Electron 8035.T and Advantest Corp
6857.T are down around 7.5% each, underperforming a 5% drop in
the Nikkei benchmark index .N225 .
"Machinery and exporters' stocks are the most hit and will
likely stay pressured in the next 2-3 months," said Naoki
Kamiyama, chief strategist at Nikko Asset Management.
He said it now seemed far fetched to expect Trump and
Chinese President Xi Jinping would reach a deal by the time they
meet on the sidelines of a G20 gathering in late June.
Japanese-based Apple suppliers have also turned sharply
lower, with Murata Manufacturing 6981.T diving 16%, Alps
Alpine 6770.T plunging 15% and Minebea Mitsumi 6479.T
sliding 13%.
Construction equipment makers with heavy China exposure are
taking it on the chin, too.
Komatsu Ltd 6301.T has dived 18%, while another Hitachi
Construction Machinery 6305.T has plunged 16%. Komatsu expects
a 15.3% drop in operating profit for this fiscal year due to
weak sales from such regions as China and North America for its
construction, mining and utility equipment.
Investors expect Japanese exporters' earnings will remain
under pressure. Japanese companies are likely to report a 1%
drop in pretax profits this fiscal year through March, Daiwa
Securities said, while machinery firms are expected to see a 14%
drop and precision equipment makers are seen posting a 9% fall.
According to BoFA Merrill, global fund managers' Japan
equity allocation showed that global investors have no plan to
go overweight on Japan over the next 12 months as the profit
outlook for Japanese equities has continued to deteriorate.
"On top of weak earnings concerns, there is another worry
about Japan's weak EPS which has a correlation with trade data,"
said Shusuke Yamada, a FX/Equity strategist at Bank of America
Merrill Lynch, referring to the earnings-per-share standard
measure of equity returns.
"There is no room for Japan's monetary policy to loosen
further and the country's population is not growing. Japan's
economy relies heavily on the global economy, so there is no
domestic reason to buy Japanese stocks now."
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Machinery stocks vs Nikkei https://tmsnrt.rs/2LIawx5
Apple https://tmsnrt.rs/2Eb5lQ9
MSCI and export https://tmsnrt.rs/2EcAFhf
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(Reporting by Ayai Tomisawa; Editing by Kim Coghill)
((ayai.tomisawa@thomsonreuters.com; 81-3-6441-1875; Reuters
Messaging: ayai.tomisawa.thomsonreuters.com@reuters.net))