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LEAD: Tokyo stocks drop, hit by soft economic data, Chinese stock plunge.

TOKYO, May 30 Kyodo


Tokyo stocks declined Wednesday, hit by weaker-than-expected Japanese April industrial output data and slumping Chinese stocks.

The 225-issue Nikkei Stock Average fell 84.30 points, or 0.48 percent, on the day to 17,588.26. The broader Topix index of all First Section issues on the Tokyo Stock Exchange fell 4.15 points, or 0.24 percent, to 1,733.75.

Tokyo stocks traded without a clear direction in the early morning, with the key Nikkei index temporally stepping into the plus column.

But selling gathered steam in midmorning after the Shanghai stock market opened sharply lower on news that the Chinese government has tripled stock trading stamp duty to calm the country's frenzied equity market.

Scared by the sharp losses in Chinese stocks that reached as much as 7 percent at one point, investors moved to lock in profits from recent Tokyo gainers, especially high-priced ones such as Toyota Motor, brokers said.

Soft Japanese industrial output data, released early in the morning, also worked to impair sentiment, they added.

Japanese industrial production decreased a seasonally adjusted 0.1 percent in April from the previous month, according to the government. That was less than the average projection of a 0.4 percent increase by private-sector economists in a Kyodo News survey.

The reading ''chilled market expectations that shares may break upward through the recent boxed range,'' said Yuya Yamaguchi, manager of the equity marketing department of Daiwa Securities SMBC Co.

Since Tokyo shares notched solid gains the previous day following the release of stronger-than-expected job market and housing spending data, profit-taking could set in anytime, Yamaguchi said. ''Furthermore, Chinese stocks gave an additional blow,'' he said.

Fumiyuki Nakanishi, chief equity strategist at SMBC Friend Securities Co., said the latest output reading ''indicated that the Japanese economy is entering a lull.''

But Tokyo shares' downside will likely be limited, he said, noting that recent recoveries in the long-battered Mothers market and other start-up markets have improved sentiment regarding the overall markets.

Among the TSE's 33 sector indexes, mining and oil sectors were hit the hardest reflecting the overnight drop in crude oil futures. Japan Petroleum Exploration dropped 150 yen to 8,630 yen while Inpex slumped 20,000 yen to 1,050,000 yen.

Automaker issues also took a beating with Toyota Motor losing 70 yen to 7,280 yen while Honda Motor shed 30 yen to 4,190 yen.

While unloading recently advanced large-capitalization issues, investors opted to snap up small-cap issues with good news, brokers said.

For instance, Nittoc Construction, a contractor for general foundation works, rose 11 yen to 118 yen following its announcement the previous day that it booked 400 million yen in group net profit for fiscal 2006 through March, returning to the black following a loss in fiscal 2005.

On the First Section, declining issues outnumbered advancing issues 898 to 706, with 120 shares ending the day unchanged.

Mizuho Financial Group was the most heavily traded issue by value, falling 5,000 yen to 859,000 yen. Sumitomo Metal Industries was the day's volume leader, adding 12 yen to 652 yen.

Trading volume on the main section totaled 2,020.33 million shares, against Tuesday's 1,779.05 million shares.

The TSE's Second Section index climbed 8.05 points, or 0.20 percent, to 4,010.58 on a volume of 50.56 million shares.

On the Osaka Securities Exchange, the near-term June Nikkei 225 index futures contract went down 90 points to 17,590.
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Publication:Japan Weekly Monitor
Date:Jun 4, 2007
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