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Nikkei eases 0.4 percent, earnings disappointments hurt, Komatsu tumbles

* Nikkei drops 0.4 pct, Topix down 0.3 pct

* Komatsu tumbles 8.6 pct after cutting profit outlook

* Hedge funds, Japanese retail investors taking profits

By Tomo Uetake

TOKYO, Oct 29 (Reuters) - Japanese stocks slid on Tuesday

morning, hit by Komatsu Ltd dropping sharply after the

world's second largest equipment maker issued a profit warning,

dragging down other companies exposed to emerging markets.

The earnings season has failed to impress so far, raising

doubts about Japan Inc.'s outlook and hampering the broad


The Nikkei fell 0.4 percent to 14,334.90 in

mid-morning trade, after climbing 2.2 percent on Monday. Support

for now is seen around an important technical level -- Ichimoku

cloud top -- at 14,235.

Komatsu tumbled as much as 8.6 percent to a two-month low

after the company cut its full-year operating profit forecast by

more than 30 percent on Monday, citing a worse-than-expected

drop in demand for mining equipment. It was the

most-traded stock by turnover on the main board.

The surprisingly downbeat announcement hurt its rivals and

other companies with high exposure to China and emerging


Industry peer Hitachi Construction Machinery Co Ltd

, lost up to 7.3 percent to hit a three-week low after

the company reported a 33.6 percent drop in its April-September

net profit.

Emerging markets-sensitive tyre maker Bridgestone Corp

fell 0.9 percent.

Traders say the disappointing earnings reports have prompted

some investors to book profits from across the market.

"I expect people to take more profits as the market will be

running out of positive factors after earnings," said Kyoya

Okazawa, head of global equities and commodity derivatives at

BNP Paribas in Tokyo.

"Buying by long-only players are subdued this week.

Outperformers this year with high foreign ownership, such as

SoftBank, are likely to be prone to profit-taking," Okazawa also


Index heavyweight SoftBank Corp fell 1.2 percent.

KDDI Corp provided some welcome positive news on

earnings and bucked the market. The stock rose 0.8 percent after

the mobile operator's net profit for the April-September period

jumped 104.4 percent from a year earlier to a record 163.01

billion yen ($1.67 billion) due mainly to strong smartphone


Some overseas hedge funds were cashing in ahead of book

closing in late November, said Yasuo Sakuma, portfolio manager

at Bayview Asset Management.

Investors will have further trading opportunities from

another batch of earnings later in the day, including from Kobe

Steel Ltd, Hitachi Ltd, Fanuc Corp,

and Tokyo Electron Ltd.

Markets are also watching out for this week's outcomes of

policy meetings from the U.S. Federal Reserve and the Bank of

Japan, which are widely expected to keep policy on hold.

The broader Topix shed 0.3 percent to 1,195.36 in

moderate trade, with volume at 47.7 percent of its full daily

average for the past 90 trading days.

The benchmark Nikkei has risen 38 percent so far this year,

driven up by aggressive BOJ and government stimulus measures.