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Japan's Nikkei average fell 0.3 percent on Wednesday as Nomura Holdings and other securities firms slid after a brokerage downgrade, while investors held back as the earnings season approaches. Japan Tobacco slid 4.1 percent after Norway said it had dropped the firm and other tobacco companies from its $450 billion wealth fund for ethical reasons.

Worries that China may be moving towards slower growth weighed on investor confidence, market players said, after news that China's central bank has ordered at least two lenders to increase their reserves. Investors were cautious after consensus-beating results last week from US tech firm Intel Corp failed to excite the market, said Tomomi Yamashita, senior fund manager at Shinkin Asset Management.

"There are concerns that stocks might fall after earnings run their course, as Intel failed to gain after its results," he said. "China's bank news might have also affected investor confidence as it indicates the country is moving towards tightening policy, though it's hard to think the move would directly work to dampen an economic recovery at this moment."

The benchmark Nikkei shed 27.38 points to 10,737.52, after eking out small gains in earlier trade. The broader Topix retreated 0.5 percent to 944.72. Investors are waiting for US earnings reports due out later in the day, including from Bank of America and Morgan Stanley.

For the first time since late December, foreign securities houses placed more sell orders than buy orders before the start of trade. The orders sparked concern that foreign investors, who helped push the Nikkei to 15-month highs last week, may now be turning bearish. In the first week of January, foreign buying surged to some 733 billion yen ($8 billion), the biggest weekly purchase since July 2007, Ministry of Finance data showed.

About 2.4 billion shares traded hands on the Tokyo exchange's first section. Declining stocks outnumbered advancing ones, 996 to 547. Securities firms fell after Credit Suisse lowered its stance on the sector from "overweight" to "market weight," saying investors should shift to banks, as the risk of bank fundraising was receding.

Credit Suisse cut its ratings on Nomura, Japan's largest brokerage, to "neutral" from "outperform", citing the limited upside for the stock price. Matsui Securities was similarly downgraded, with Credit Suisse citing an "unexpectedly large" decline in margin trading balances. Nomura lost 3.8 percent to 711 yen and Matsui Securities fell 3.7 percent to 654 yen. Daiwa Securities Group shed 2.4 percent to 482 yen.

Shares of Japan Tobacco slid to 316,000 yen. Known as the "oil fund", Norway's $450 billion government fund has dropped 17 tobacco companies, including Japan Tobacco. Shipping firms fell after the Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell 2.6 percent on Tuesday due to muted activity, with analysts saying global shipping demand still needed to strengthen.

Kawasaki Kisen K.K. lost 4 percent to 334 yen, while Nippon Yusen fell 1.5 percent to 337 yen. Toyota Tsusho shot up 6 percent to 1,489 yen after Australian mining company Orocobre Ltd announced that it has agreed to set up a joint venture with the Japanese trading firm to develop a lithium production project in Argentina.

Copyright Reuters, 2010


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