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Asia markets mixed; Nintendo shares tumble 18 pct on dampened investor sentiment

Nintendo shares tumbled nearly 18 percent in an otherwise quiet Asian trading session on Monday, as traders eye key central bank meetings in the U.S. and Japan due later in the week.

The Japanese game-console maker closed down 17.72 percent at 23,220 a share, almost 29 percent down from a high of 32,700 on July 19.

The broader Topix index closed down 2.15 points, or 0.16 percent, at 1,325.36. The benchmark Nikkei 225 index closed flat at 16,620.29.

Other Asian markets also traded modestly, with little movement seen in benchmark indexes in the region.

Australia's ASX 200 closed up 35.41 points, or 0.64 percent, at 5,533.60, with a 0.55 percent increase in the heavily-weighted financials sub-index. In South Korea, the Kospi closed up 1.98 points, or 0.1 percent, at 2,012.32. Hong Kong's Hang Seng index was down 0.19 percent.

Chinese mainland markets closed mostly up, with the Shanghai composite gaining 3.98 points, or 0.13 percent, to 3,016.80, while the Shenzhen composite finished near flat at 2,019.81.

Nintendo on Friday said the impact of the wildly popular "Pokemon Go" mobile app on its consolidated business results will be limited. Creators of the Pokemon franchise, the Pokemon Company, will receive a licensing fee and compensation for collaboration in the development and operations of the application from game-maker Niantic. Nintendo owns a 32 percent stake in the Pokemon Company.

Nintendo, due to announce earnings later this week, said its forecast took into consideration the production of an accessory that will be used with the "Pokemon Go Plus" application to alert users of nearby Pokemon characters.

Since July 6, when the game was first rolled out in the U.S., Nintendo shares had more than doubled.

Data from IHS Markit on Friday also showed that despite the sudden spike in popularity for the stock, the amount of short positions in the stock - that is, investors making bets that the price will fall, - had tripled in just over a week, suggesting many market participants expect "Pokemon Go" will not be able to sustain Nintendo's current stock levels.

The Japanese market also had a muted reaction to better-than-expected export data released before trading opened.

Japan's exports for June fell 7.4 percent on-year, the ninth consecutive monthly fall, according to Reuters, but the reading was better than the forecast of 11.6 percent drop from a Reuters poll of economists. In volume terms, exports rose 2.9 percent in June on-year, the first increase in four months, reported Reuters.

Imports fell 18.8 percent on-year, slightly better than the forecast of 19.7 percent decline. The trade balance was at a surplus of 692.8 billion yen ($6.53 billion), compared with a 494.8 billion yen surplus expected, said Reuters.

"The improvement for exports partially reflected waning disruption caused by the Kumamoto Earthquake, as well as yen strengthening and uncertainties about the influence of Brexit on exports," said Harumi Taguchi, principal economist at IHS Global Insight.

"The year-on-year effect from weak oil prices is likely to gradually soften and lift overall import prices, but this could be partially offset by weak domestic demand and the effect from yen strength," she added.

Investors will also be eyeing the Bank of Japan's (BOJ) two-day monetary policy meeting due to start on July 28, with markets expecting additional fiscal and monetary stimulus to jump-start the country's anemic growth.

"Markets seems to have speculatively priced in the next couple of months of potential monetary and fiscal stimulus within a few weeks," said Angus Nicholson, a market analyst at brokerage firm IG.

Nicholson added there were some lingering doubts among investors that the BOJ could elect to stand pat on rates later this week, after the Bank of England and the European Central Bank chose to leave their monetary policies unchanged earlier this month.

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Frederic Neumann, co-head of Asian economic research at HSBC was convinced the BOJ would move on policy come Friday.

"We think they'll deliver a bit of everything, but not quite the bazooka some may be hoping for," Neumann wrote in a Monday note. He added investor expectations are "all over the place."

"One thing, therefore, seems certain: there's bound to be plenty of volatility. And that'll probably be accentuated by the intricate nature of the BOJ's measures - it takes even seasoned observers to comb through the announcement and gauge its exact implications," said Neumann.

At the G-20 summit in Chengdu, China, over the weekend, BOJ Governor Haruhiko Kuroda dismissed the use of "helicopter money" to reach the central bank's inflation target, Reuters reported.

On Friday, the Japanese yen, which had fallen to levels near 107.15 against the dollar on Thursday, spiked to the 106 handle after the BBC aired an interview with BOJ Governor Haruhiko Kuroda, in which he ruled out the possibility of "helicopter money" - or essentially printing money and distributing payouts - to tackle deflation in Japan. The date the interview was conducted was not immediately clear, but the Wall Street Journal reported it had been recorded in mid-June.

The yen traded at 106.10 on Monday afternoon local time.

Sylvain Grandadam | Getty Images

Elsewhere, shares of Mazda Motor closed up 5.93 percent at 1,571 yen, after a Nikkei report said the automaker's group operating profit likely dropped 6 percent to around 50 billion yen ($471 million) in the three months ended June due to yen strength. But, the Nikkei reported, the number still exceeds the 33 billion yen market consensus provided by analysts surveyed by Nikkei Quick.

Oil prices traded lower during Asian hours, with global benchmark Brent down 0.33 percent at $45.54 a barrel, while U.S. crude slipped 0.29 percent to $44.06.

Stateside, the U.S. Federal Open Market Committee is due to start a two-day monetary policy meeting on July 26, with the market expecting the Fed to keep monetary policy steady.

"We expect the Fed to leave rates on hold as it seeks to gain more confidence that U.S. growth is back on track and that the impact from Brexit will be minimal," said Shane Oliver, head of investment strategy and chief economist at AMP Capital.

Oliver added that he expected the Fed to "raise rates in a gradual and cautious fashion."

The dollar was trading at 97.383 against a basket of currencies. The dollar had strengthened over the last two weeks from levels under 96, boosted by positive economic data stateside that appeared to indicate an upswing in momentum for the U.S. economy.

"There seems to be a self-perpetuating cycle of better U.S. data, stronger U.S. dollar and gains in the U.S. markets," said Nicholson.

On Friday, U.S. stocks closed higher for the fourth straight week, with the S&P hitting a new record high.

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