Strong month for Tokyo despite late dip

Tokyo stocks tumbled the most in seven weeks and fell back through the 10,000 level on rising fears of Chinese tightening, but still recorded their best month since March as foreign funds switched into the Japanese market.

The Nikkei 225 Average sank 1.9 per cent to 9,937.04 to lead declines in Asian markets but was the top gainer among the world’s 40 largest equity markets during November, advancing 8 per cent.

Tuesday’s wobble was linked to nervous investor expectations over the imminent release of Chinese manufacturing data, with a strong reading expected to accelerate Beijing’s move to raise interest rates.

The FTSE Asia-Pacific index was flat for the month up until Monday’s close but Tuesday’s 0.8 per cent fall to 247.39 – its lowest level for nearly two months – meant the regional benchmark had its first monthly decline since August as eurozone debt woes plagued global markets.

“Investors are worrying that China could raise interest rates after announcing its purchasing managers’ index [on Wednesday],” Hideyuki Ishiguro, of Okasan Securities, told Reuters. “Japanese exporters with strong Chinese ties have already been overbought so investors simply took the chance to sell them today.”

TDK , an electronics maker that gets more than 30 per cent of its sales from China, dropped 3.6 per cent to Y5,390 while Hitachi Construction Machinery , the world’s biggest maker of giant excavators, which gets more than a quarter of its sales there, sank 3.1 per cent to Y1,908.

Komatsu , Japan’s largest construction machinery maker, which gets about 20 per cent of its sales in China, retreated 2.4 per cent to Y2,318.

A bad session for Tokyo’s steelmakers saw declines on the back of downgrades. Nippon Steel tumbled 4.5 per cent to Y277, the most in more than a year, while JFE Holdings lost 2.6 per cent to Y2,661 after both companies had their ratings cut by Mizuho Securities, which said earnings would miss forecasts. Sumitomo Metal Industries , which was also downgraded, slid 3.3 per cent to Y203.

Also hit by a ratings cut, this time from Credit Suisse, was Mitsubishi UFJ Financial , the country’s largest bank by market value, which sank 2.2 per cent to Y396.

But some support for the market came from upbeat comments by Nintendo , the world’s biggest maker of portable video game machines, on its Thanksgiving weekend sales in the US of the Wii game console. Its shares jumped 3.4 per cent to Y22,730, the most in more than three months.

Analysts said November’s boost for the Nikkei could have further to go. “Short covering by hedge funds appears to be continuing, though it has lost momentum,” said Kenichi Hirano, of Tachibana Securities. “[But] moves like this by overseas hedge funds will likely continue into the new year as they try to bring Japanese stocks back to neutral in their portfolio after having overly shorted them up to now.”

Indian stocks outperformed for a second day as the country’s second-quarter growth figures surprised on the upside. The BSE Sensex index rose 0.6 per cent to 19,521.25 after erasing falls of 1 per cent prior to the data release. But it still slipped 2.6 per cent over the month.

The Shanghai Composite had the worst November of Asia’s leading equity markets, falling 5.3 per cent to 2,820.18 as tightening fears sapped sentiment. But Hong Kong’s Hang Seng index fell just 0.4 per cent over the month to 23,007.99.