Asia stocks weaken ahead of Chinese holiday

SYDNEY (MarketWatch) — Most Asian stock markets traded lower on Thursday, as Japanese shares retreated after rallying sharply in the previous session, while Chinese stocks slipped ahead of the Lunar New Year holiday.

Japan’s Nikkei Stock Average JP:100000018 -1.02%  lost 1% after gaining 3.8% on Wednesday to close at a four-year high. Despite the move lower, however, the benchmark was still up more than 9% since the start of the year.

In China, Hong Kong’s Hang Seng Index HK:HSI -0.33%  lost 0.4% to pare year-to-date gains to 2.2%, while the Shanghai Composite Index CN:000001 -1.08%  fell 1.3% to cut its 2013 advance to 5.9% ahead of the Lunar New Year holiday, which starts on Sunday.

“I think that investors are packing away for the New Year holiday. That’s why trading motivation is not great,” KGI Asia chief operating officer Ben Kwong said.

“The market sentiment has turned a bit cautious — A-shares have softened,” he said, referring to yuan-denominated Chinese shares. “I think this is reasonable, as the market has had a good run.”

Elsewhere in Asia, South Korea’s Kospi KR:SEU -0.02%  slipped 0.2%, while Taiwan’s Taiex XX:Y9999 +0.25%  traded flat, and Australia’s S&P/ASX 200 index AU:XJO +0.30% inched up 0.3%.

U.S. stocks ended with mostly modest gains Wednesday, as earnings helped support the market, though the tech-heavy Nasdaq moved lower. Read: Stocks edge up on earnings; Nasdaq falls

As in the U.S., earnings provided the focus in Australia on Thursday, with widely-owned telecom giant Telstra Corp. AU:TLS +1.31%   TTRAF -1.25%  up 1.5% after it posted a modest profit gain while keeping its dividend payout and full-year guidance unchanged. Read: Telstra first-half profit rises 8.8%

National Australia Bank Ltd. AU:NAB +1.85%   NAUBF +3.96%  climbed 1.9%, helped by a 4% rise in quarterly adjusted earnings. Read: National Australia Bank Q1 cash earnings up 4%

News Corp. AU:NWS -3.24%   NWSA -0.46%  fell 2.6%, however, after the media major cut its fiscal year outlook, even as it reported its second-quarter net profit more than doubled. News Corp. owns MarketWatch, the publisher of this report.

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Over in Tokyo, Sony Corp. JP:6758 +3.24%   SNE -0.06%  — due to post its own earnings later in the day — rose 3.9% after a deal announced Wednesday to form an electronic-parts-mounting joint venture with sewing-machine maker Juki Corp. JP:6440 +5.63%  Shares of Juki surged 6.9%.

Japanese exporters and financials had put in a very strong performance on Wednesday, as the yen weakened to fresh multi-year lows against the dollar amid expectations for a more aggressive monetary policy stance at the Bank of Japan.

“Japan is dominated by weakness in the yen, which is favorable for the Nikkei,” said Kwong at KGI. “Although the move has been driven by expectations rather than fundamentals, it’s provided an excuse to buy” Japanese blue chips.

Still, Kwong said the yen hasn’t yet depreciated alarmingly, though if the dollar rises above ¥100, it “will raise concern about a currency war.” Currency war is a term used for competitive currency devaluation between countries trying to boost their export competitiveness.

On Thursday, the dollar USDJPY -0.14%  pulled back a bit against the yen to trade at ¥93.38 after rising as high as ¥94 at one stage on Wednesday.

Exporters retreated along with the U.S. currency, especially in the technology sector, where Citizen Holdings Co. JP:7762 -2.64%   CHCLY +4.10%  traded down 2.5% and Advantest Corp. JP:6857 -2.92%   ATE -0.53%  retreated 2.5%.