Nikkei hurt by weak banks, disappointing Gree results

(Reuters) - Japan's Nikkei share average edged lower on Wednesday as bank and steel shares slid, offsetting gains in exporters from a weaker yen following encouraging economic data from the United States and Germany.
The Nikkei .N225 pared losses at the last minute to end down just 0.1 percent at 8,925.04 after facing resistance at its 200-day moving average of 8,959.67.
Banks .IBNKS.T and iron and steel companies -- recent strong performers -- came under heavy selling pressure amid low liquidity, with many investors away for Japan's "Obon" summer holidays.
"Although the market is quiet we're still seeing some sharp moves as shares reverse with people selling off stocks that have risen recently, or else hunting for battered bargains," said Kenichi Hirano, operating officer at Tachibana Securities.
The Topix's iron and steel subindex .ISTEL.T sagged 2.6 percent, dropping to the 38.2 percent retracement of an 11 percent rebound since July 25, when it hit a 9-year intraday low. After rebounding 16.8 percent in the same period, Nippon Steel (5401.T) fell 2.4 percent after BNP Paribas cut its earnings forecast.
BNP Paribas also dropped its price target for Kobe Steel Ltd (5406.T) to 75 yen from 100, contributing to the stock's 5.7 percent fall.
Gree Inc (3632.T) sagged 7.3 percent after the social gaming company's full-year operating profit and earnings guidance for the business year ending June 2013 undershot market expectations.
The selloff came after a 14 percent rally over the previous three sessions as investors had expected strong results from Gree after rival DeNA Co Ltd (2432.T) beat market forecasts with its quarterly earnings last Thursday. DeNA dropped 1.8 percent as the fourth-most traded stock, while Gree was the second most-traded, behind Sumitomo Mitsui Financial Group (8316.T).
Sumitomo Mitsui was one of the megabanks sold off, along with peers Mitsubishi UFJ Financial Group (8306.T) and Mizuho Financial Group (8411.T), which lost between 0.6 and 2.2 percent.
"The banking index couldn't break the 110-mark again. It's rangebound trade, so everyone just goes short on the megas in a week where there is no liquidity," a senior dealer at a European brokerage said.
Some exporters enjoyed a bounce from an easing yen, including industrial robot maker Fanuc Corp (6954.T), Canon Inc (7751.T) and construction machinery maker Komatsu Ltd (6301.T), up between 0.7 and 1.8 percent.
"Although reversal is the prevailing tendency in today's market, it doesn't go for everything - just look at Sharp," Hirano of Tachibana Securities said.
Struggling consumer electronics maker Sharp Corp (6753.T) sank 12.4 percent to 169 yen, its lowest level since December 1975 after Goldman Sachs warned of further downside risk and cut its price target, while Deutsche Bank downgraded its rating to 'sell' from 'hold'.
UNDERPERFORMANCE
Japanese corporate earnings have been weak so far this quarterly reporting season, with 53 percent of the 154 Nikkei companies missing market expectations, data from Thomson Reuters StarMine showed. That compared with misses of 40 percent in the previously quarter's earnings season.
The benchmark Nikkei is up 5.6 percent so far this year, underperforming a 10.6 percent rise in the pan-European STOXX Europe 600 .STOXX index even though the region is grappling with a sovereign debt crisis.
Japan has replaced the euro zone as the largest region in which fund managers are underweight equities in the latest monthly asset manager survey by Bank of America Merrill Lynch.
Nevertheless, valuations on Japanese equities remained cheap compared with other developed markets. The Topix .TOPX carried a 12-month price-to-book ratio of 0.8, its lowest in four years and below STOXX Europe 600's 0.85 and S&P 500's 1.9, according to data from Thomson Reuters Datastream.
The Topix eased 0.3 percent to 747.32 on Wednesday. Trading volume was relatively light, at 89.3 percent of its 90-day average.
(Additional reporting by Dominic Lau; Editing by Richard Pullin)