Much of yesterday’s stock market carnage was triggered by concerns pertaining by emerging markets such as slowing growth in China and political problems in Turkey, Argentina and the Ukraine. However the Nikkei underperformed the rest of the Asia with a 2.5% fall, its steepest drop since August.
 
Record trade deficit
Trade figures added to the gloom in Japan yesterday as it reported a record annual trade deficit in December. The deficit amounted to 11.5 trillion yen, almost double the previous year’s 6.9 trillion yen. Imports rose 25% from the same period the previous year and exports gained 15%, leaving a monthly deficit of 1.3 trillion yen. The increase in import bill was attributed to energy shipments and weakness in the yen.

Nikkei trading near short-term support?
Yesterday’s fall takes the year-to-date loss of the Nikkei to 7.9%. or 1,286 points, closing just five points above the 15.000 mark. It is the lowest close the Nikkei has seen since 14 November 2013.
 
According to Reuters, the Nikkei is now below its 75-day moving average of 15,119.73 and it may see some short-term support around 14,731.17, the 61.8% retracement from an October low to December high.
 
Looking at fundamentals, Bloomberg pointed out that stocks on the Tokyo Stock Exchange are trading at 1.25 times book value as of yesterday, compared with 2.57 for the S&P 500 and 1.80 for the Stoxx Europe
600 Index on Jan. 24. Volume was also 23% higher than the 30-day average.

Source: Macquarie Research - 28 Jan 2014