January 21, 2020 / 2:33 AM / a month ago

Nikkei edges down; China virus fears hit airlines

TOKYO, Jan 21 (Reuters) - Japanese shares dropped on Tuesday, with airlines leading the decline as an outbreak of a new coronavirus has spread to more Chinese cities, stoking fears of a wider epidemic that could hamper the economic activity in the region.

Profit-taking was also ripe after the market hit a 15-month high the previous day, especially in recent gainers such as semiconductor-related shares.

The Nikkei share average fell 0.82% to 23,886.99 and the broader Topix lost 0.56% to 1,734.46 ahead of a central bank policy meeting outcome.

Airline shares dropped 1.6% to become the worst performing sector as the virus outbreak fanned worries that it will spread globally as Chinese travellers take flights abroad for the week-long holiday starting this week.

China’s health authorities said the virus can pass from person-to-person. Three other countries — Japan, South Korea and Thailand — have confirmed cases already.

Shiseido, cosmetic maker that has benefitted from strong demand in China and from Chinese tourists, also dropped 2.5% to become the worst performer among the Nikkei constituents.

But anxiety over the virus outbreak has brought a windfall to some others.

Azearth, a supplier of protective attire, jumped 16.2% to the day’s limit, while Airtech Japan, which manufactures air shower and other air purifying products, gained 10.6%.

Shikibo, which produces anti-virus mask, gained 6.5%.

Elsewhere, Maeda Road Construction soared for a second day after its parent company Maeda Corp said on Monday it would launch an unsolicited bid to gain a controlling stake in the road builder.

Hopes of more industry consolidation have helped to lift the entire sector. The Tokyo Stock Exchange’s construction company index rose 0.9% to a 15-month high.

On the other hand, Toshiba Machine tumbled 8.8% as the price of a takeover bid launched by an investment fund backed by veteran Japanese activist investor Yoshiaki Murakami fell short of market expectations.

Chip-related shares gave in to profit-taking, with Screen Holdings dropping 2.8%, while Tokyo Electron lost 2.2%.

The yen ticked up 0.15% to 109.99 to the dollar as caution over the new virus lifted the safe-haven currency. A stronger yen eats into exporters’ foreign earnings and profits. (Editing by Subhranshu Sahu)

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