Japanese stock benchmarks may fall this week, wiping out this year's gains, as a strengthening yen against the US dollar threatens to hurt the global competitiveness of Honda Motor Corp and other
exporters.
Computer-related shares such as Toshiba Corp may also drag the Nikkei 225 Stock Average lower on concern US rivals such as Texas Instruments Inc will indicate that industry demand won't improve soon. This week, Microsoft Corp said it will miss earnings forecasts and Intel Corp cut its spending budget.
"The yen's strength is a big worry for exporters and it's terrible for market sentiment," said Taiji Yoshida, who helps handle US$23.7 billion as a fund manager at Yasuda Capital Management Co.
"There's little evidence to suggest that tech demand will rebound in the first half," Yoshida said.
Elsewhere in Asia, the weaker dollar may also hurt exporters such as Samsung Electronics Co and Taiwan Semiconductor Manufacturing Co (台積電).
Singapore's Chartered Semiconductor Manufacturing Ltd and other computer-related companies may decline after the island's electronics exports slowed in December because of weaker holiday season sales in the US.
Expected signs of slower economic growth in Hong Kong may also lead Hang Seng Bank Ltd and Henderson Land Development Co, which depend on local businesses, lower.
Last week the Nikkei rose 2.6 percent to 8,690.25, while the broader Topix index also gained 2.6 percent to 859.25. So far this year, the Nikkei added 1.3 percent and the Topix advanced 1.9 percent.
The yen has advanced 6 percent in the past three months and rallied to a four-month high of Japanese Yen 117.64 per dollar earlier this week. That's about 4.5 percent stronger than what large manufacturers are expecting for the fiscal year ending March 31, according to a Bank of Japan survey.
In the past three months, the South Korean has won gained 6.3 percent.
"Exporters will have a difficult road ahead," said Masanao Yoshitake, who helps manage US$2.5 billion at Meiji Dresdner Asset Management Co.
The senior fund manager recently raised his cash holdings by selling computer-related shares.
Honda relies on the US for more than half its sales. Japan's No. 2 carmaker expects the yen to average Japanese Yen 125 to the dollar for the fiscal year to March 2003.
For Toyota Motor Corp, every Japanese Yen 1 gain contributes about Japanese Yen 20 billion to operating profit, 70 percent of which comes from North America.
Computer-related companies, which account for almost a quarter of Japan's exports, may also be hurt as earnings by US rivals may suggest that a recovery in industry demand has stalled.
Texas Instruments, whose chips powered half the world's mobile phones sold last year, is due to report earnings on Jan. 22.
"Last year was very tough for us because we were overly optimistic about a recovery in the technology sector," said Robert McKillop, head of Japanese equities at Edinburgh-based Standard Life Investments, which oversees US$120.7 billion globally.
Samsung Electronics, whose memory chips and other computer parts account for a 10th of South Korea's exports, may lead declines in the Kospi index.
In Taiwan, TSMC, which makes chips for Intel and Nvidia Corp, may fall. Chunghwa Picture Tubes Ltd (
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