* Nikkei drops 1.7 pct; Topix down 1.4 pct
* Tokyo Electron rises after Q2 orders beat expectations
By Dominic Lau
TOKYO, Oct 10 (Reuters) - Japan's Nikkei share average fell to a two-month low on Wednesday on concerns that upcoming corporate earnings results for the latest quarter have been hit by slowing global growth.
shed 1.7 percent to 8,622.22 after falling 1.1 percent on Tuesday.
Shun Maruyama, chief Japan equity strategist at BNP Paribas, said the Nikkei could test 8,500 as short selling by investors were likely to continue in the next one to two weeks.
"Current short selling pressure comes from hedging against the forthcoming results season," Maruyama said.
He said the short-selling ratio on the Nikkei stood at 26 percent on a five-day moving average, below the 28 to 30 percent level when short-covering tends to emerge.
"Eight thousand five hundred is the supporting line for many kinds of options and futures trading. Many investors have 8,500 put options. If the price breaks down below 8,500, ... maybe the market could go down to 8,200, 8,300."
Automakers came under pressure after they confirmed sharp drop in September sales in China over a territorial row between the two countries and raised concerns about their future in the world's biggest auto market.
Toyota Motor Corp , Nissan Motor Co and Honda Motor Co dropped between 0.9 and 2.2 percent, while auto parts makers also suffered, with Denso Corp , Koito Manufacturing Co Ltd and Exedy Corp down
between 0.8 and 3.2 percent.
But Tokyo Electron Ltd
advanced 2.1 percent after its second quarter orders came in at 75 billion yen ($959 million), above market expectations of between 50 and 60 billion yen, traders said.
The broader Topix index dropped 1.4 percent to 717.18.
According to Thomson Reuters I/B/E/S, Japanese companies are forecast to post an average 57 percent year-on-year rise in earnings in 2012, down from an earlier estimate of 73 percent four months ago, after a 23 percent year-on-year decline last year, when the country was hit by a massive earthquake and tsunami as well as a nuclear meltdown and fallout.
The benchmark Nikkei is up 2 percent so far this year, trailing a 14.6 percent rise in the S&P 500
and a 10.5 percent gain in the pan-European STOXX Europe 600
But Japanese shares are slightly more expensive than their European peers, with a 12-month forward price-to-earnings ratio of 11.4 versus STOXX Europe 600's 11.1, data from Thomson Reuters Datastream showed. The S&P 500's 12-month forward P/E stands at 12.8. ($1 = 78.1850 Japanese yen)
(Editing by Eric Meijer)
Keywords: MARKETS JAPAN STOCKS/