Wong Maye-E/AP
(Reuters) – Japan’s Nikkei share average dropped to four-month lows on Friday while the broader Topix was almost flat as investors held off buying on concerns North Korea could launch another missile on Saturday to mark its founding day.
The Nikkei fell 0.6 percent to 19,274.82, its lowest close since April 28. The broader Topix was down 0.3 percent at 1,593.54. On the week, the Nikkei lost 2.1 percent while the Topix shed 1.6 percent.
As the Nikkei underperformed, the Nikkei/Topix ratio hit a three-year low of 12.10.
Japanese shares have been dragged down by tensions over North Korea’s nuclear and missile programmes, following its missile launch on Aug. 29 and nuclear test on Sept. 3.
The biggest talking point in the market was what North Korea might do on Saturday, given it has conducted missile tests on important holidays before.
North Korea on Thursday pledged to take “powerful counter measures” against U.S. pressure or any new sanctions stemming from its missile programme, accusing Washington of wanting war.
“Since we all know that North Korea has a holiday on Saturday, it’s hard to buy stocks now. That’s especially so for people like us, who manage funds for customers,” said an equity investment manager at a Japanese life insurance company.
Some were hopeful that the market’s sentiment will improve after the weekend, barring shocking moves from Pyongyang.
“Most investors will be on the sidelines until Sept 9,” said Soichiro Monji, chief strategist at Daiwa SB Investments.
“But given that the U.S. debt ceiling is already extended, I expect to see a rebound next week.”
The market mostly shrugged off a revision in Japan’s second quarter GDP.
The downgrade to an annualised rate of 2.5 percent in April-June from an initial estimate of 4.0 percent growth was widely expected after data used to revise GDP figures showed capital spending growth in April-June slowed from the previous quarter.
Food companies were among the worst performers falling 1.1 percent.
Because they are considered to be defensive shares and have been bought as an alternative to low-yielding bonds, some investors may be selling them after the European Central Bank indicated that it could wind back its stimulus, said Tomoichiro Kubota, senior market analyst at Matsui Securities.
ECB President Mario Draghi signalled the central bank could make a decision on the future path of its stimulus in October even as he cautioned that the euro’s strength was already weighing on inflation.
On the other hand, many exporters shares were resilient despite the yen’s strength. The transportation equipment index , comprised mainly of carmakers, was down 0.2 percent, Toyota Motor was also down 0.2 percent. (Editing by Jacqueline Wong and Eric Meijer)
