Nikkei dips on earnings fears as slowdown fears persist

* Softbank falls, beaten by KDDI on sales of iPhone 5

* Sharp takes a tumble after Goldman Sachs downgrade

* Pharmaceuticals, real estate in demand

By Sophie Knight

TOKYO, Oct 9 (Reuters) - Japan's Nikkei share averagedropped on Tuesday morning amid growing concern that companieswill slash full year forecasts when they release quarterlyearnings, after the World Bank warned China's slowdown may bemore protracted than thought.

Mobile operator Softbank Corp

weighed on themarket, sagging 2.8 percent after the Nikkei business daily saidKDDI Corp

garnered more subscribers for the iPhone 5,partly because it allowed users to keep their phone numbers whenswitching carriers. KDDI gained 0.3 percent.

Rumours of a strike halting production of the smartphone atone of Apple Inc

's Chinese factories, though denied bythe company, also weighed on major suppliers such as MurataManufacturing Co Ltd

, which lost 2.8 percent.eAccess Ltd

, a mobile provider that Softbank hassaid it will acquire in a share swap worth more than $1.8billion, gained 3.3 percent and was the second-most-traded stockon the main board by turnover. It reached 48,600 yen, edgingcloser to the 52,000 yen per share Softbank offer.

Also in favour were stocks of firms that make or deal in"induced pluripotent cells" or "iPS cells", after the twoscientists who discovered them won a Nobel Prize.

Takara Bio Inc

, which makes the cells, was untradedwith a glut of buy orders, while Shimadzu Corp, whichdevelops equipment to culture the cells, advanced 1.2 percent.

Those gains helped the pharmaceutical sector


up 1.2 percent, softening the Nikkei's fall.

The benchmark edged down 0.4 percent to 8,831.31 by themidday break, with its drop also clipped by a rise of 2 percentfor the real estate sector


"Recently land and rent prices have been strong, so realestate is lending support to the index," said Norihiro Fujito,general manager of investment at Mitsubishi UFJ Morgan Stanley.

"But there is a big downside for the market in the shape ofChina, which is pulling the Japanese market away from itscorrelation with the U.S. market."

Japanese companies have been issuing profit warnings astheir sales take a hit from a double whammy of dwindling demandacross China and a boycott of Japanese goods there because of aterritorial dispute.

The World Bank warned that China's slowdown could yet worsenand cut its growth forecast to 7.7 percent from a May forecastof 8.2 percent.

Another factor behind profit warnings is the resilienceof the Japanese currency, which may cause exporters to cutforecasts during the imminent earnings season, as many factoredin an exchange rate of about 80 yen to the dollar during thelast earnings season. The yen hovered at 78.29 on Tuesdaymorning.

"There will be more companies cutting their forecasts,particularly with the yen where it is," said Fumiyuki Nakanishi,general manager of investment and research at at SMBC FriendSecurities.

Mizuho Financial Group

dropped 2.3 percent afterthe company said late on Friday that it would post a 173.7billion yen ($2.2 billion) appraisal loss on its equityportfolio for the July-September quarter.

Elsewhere, Sharp Corp

sank 8.5 percent afterGoldman Sachs cut the troubled consumer electronics company'srating to "Sell" from "Neutral" and slashed its target price to120 yen from 175 yen.

The broader Topixlost 0.4 percent to 733.97 by themidday break.The Japanese market was closed on Monday for a nationalholiday.($1 = 78.1600 Japanese yen)(Editing by Eric Meijer)

((sophie.knight@thomsonreuters.com)(+81 3 6441 1833)(ReutersMessaging:)(sophie.knight.thomsonreuters.com@reuters.net))


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