Japanese Stocks May Decline, Paced by Komatsu, Exporters

Japanese stocks may fall, paced by companies that rely on overseas markets such as Komatsu Ltd. and Mitsubishi Corp., on lingering concern that losses tied to U.S. subprime mortgages will curb growth in the world's biggest economy.

U.S. stocks fell for a second day yesterday on speculation hedge fund losses are greater than forecast and after a report showed sales of previously owned homes declined in May.

``Japan's market had gone up on the positive outlook for overseas economies, so the continued decline in U.S. stocks will increase investor concern at home,'' said Seiichi Suzuki, a strategist at Tokai Tokyo Securities Co. in Tokyo. ``Yet there are many people who want to buy Japanese shares below the 18,000 level so the market may not have a big drop,'' Suzuki added, referring to the level of the Nikkei 225 Stock Average.

Toyota Motor Corp. and Matsushita Electric Industrial Co. may be active after the Nikkei newspaper reported the two companies, which work together on hybrid car batteries, now own stakes in each other. Matsui Securities Co. may gain after the Nikkei said Mitsubishi UFJ Financial Group Inc. plans to buy more than 15 percent of the brokerage.

Nikkei futures expiring in September last traded at 18,060 in Chicago, down from the close of 18,100 in Osaka and up from 18,045 in Singapore yesterday. The Bank of New York Japan ADR Index, which tracks the nation's American depositary receipts, was little changed.

Bear Sterns Drops

The Nikkei fell 0.6 percent to 18,087.48 yesterday, while the broader Topix index dropped 0.7 percent to 1764.87.

Bear Stearns Cos. slid to its lowest in nine months after Guy Moszkowski, an analyst at Merrill Lynch & Co., said the investment bank may have to salvage a second hedge fund that owes about $7 billion to its financiers.

The bank last week offered $3.2 billion in loans to bail out one of its hedge funds, which lost about 20 percent this year because of bad bets on collateralized-debt obligations.

After the close of trading, two people with knowledge of the situation said Bear Stearns may put up only $1.6 billion to rescue the first fund and the two people also said the second one now owes only about $1 billion.

Meanwhile, sales of previously owned homes in the U.S. fell in May to the lowest in almost four years, the National Association of Realtors said yesterday. The supply of unsold homes jumped to the highest in almost 15 years.

Komatsu is the world's second-biggest maker of earthmoving equipment and Mitsubishi Corp. is Japan's biggest trading company which sells industrial fuels and provides infrastructure building service overseas.

Toyota, Matsui Securities

Toyota, the world's largest automaker by market value, bought a 0.84 percent stake in Matsushita for about 40 billion yen ($323.7 million) in the year ended March 31, the Nikkei said, citing a financial statement Toyota submitted yesterday. Matsushita, the world's biggest consumer electronics maker, reported that for the year ended March 2006, it had 0.57 percent of Toyota's stock.

``It's about the investment made in the past but shares may gain if people interpret it as a step toward a stronger alliance,'' said Tokai Tokyo's Suzuki.

The Nikkei also reported Mitsubishi UFJ, Japan's biggest bank by assets, is in talks to buy at least 15 percent of the online brokerage Matsui to create Japan's largest online brokerage alliance.

source:bloomberg.com