Wednesday 17 October 2012

Nikkei rises to one-week high on soft yen, brighter view on earnings

TOKYO (Reuters) - Japan's Nikkei share average gained 1.2 percent on Wednesday after the yen eased to a one-month low against the euro and dollar, and investors took a sunnier view of earnings.

Exporters such as Toyota Motor Corp were given a leg up by a stronger euro as rating agency Moody's stopped short of downgrading Spanish bonds to "junk" status, affirming them at BAA3 in light of the European Central Bank's pledge to buy the bonds if needed.

"The three main factors today are the weaker yen, the fact the Nikkei had hit the bottom of its trading range, and that even companies that cut forecasts are no longer falling," said Shigeo Mito, manager of equity investment at Sumitomo Mitsui Trust.

Hitachi Ltd rose 2.4 percent and was the fourth-most-traded stock on the main board by turnover, two places behind Toyota, as JPMorgan reiterated its "overweight" rating, saying it was likely to meet its 2012 operating profit guidance. However, JPMorgan lowered its own profit outlook for the firm.

The securities sector jumped 2.5 percent, with Nomura Holdings Inc up 3.2 percent after being fined just 300 million yen for leaking client information, and Goldman Sachs raised expectations for the financial sector by doubling revenue and raising its quarterly dividend.

Those gains helped the Nikkei advance 105.24 points percent to 8,806.55, i ts highest close since October 5 and a bove its 14-day moving average at 8,741.81.

"I think that the weakness in the global economy and the expectations of poor earnings were pretty much priced in last week and now we're recovering from that sell-off," said Masayuki Otani, chief market analyst at Securities Japan.

"Consensus cooled down quite a lot and now people are realising it might have gone too far."

A YEN FOR BUYING

The benchmark dropped 3.7 percent last week, its biggest weekly fall since May, after a stream of profit warnings sparked fears of earnings coming in lower than expected, due to a global slowdown, anti-Japanese sentiment and the robust yen.

A strong yen has prompted fears of further cuts to earnings forecasts for exporters as it erodes their revenues garnered abroad once repatriated. Its retreat on Wednesday helped Toyota add 1 percent after the share dropped 3.6 percent last week.

"If the euro and the won continue to get stronger I think sentiment might become a bit more 'risk on'," said Yasuo Sakuma, portfolio manager and executive officer at Bayview Asset Management. The yen struck a 5-1/2 month low against the Korean won on Wednesday.

"This could be a turning point, but it's really too early to tell."

Although a strong yen hurts exporters, some Japanese firms have begun using the robust currency and low borrowing rates to their advantage, snapping up foreign firms at reasonable prices.

This trend was brought into focus by Softbank Corp's $20 billion deal to buy a 70 percent stake in Sprint Nextel Corp , announced this week.

The mobile provider, an index heavyweight, added 5.6 percent on Wednesday to extend Tuesday's 9.6 percent rise on CEO Masayoshi Son's assurance that the move would not dilute Softbank shares. The shares dropped over 20 percent over Friday and Monday on uncertainty about how the deal would be funded.

Also on Wednesday, major trading house Mitsubishi Corp added 0.5 percent after the Nikkei daily said it would buy a 20 percent stake in Indonesian utility Star Energy for $200 million, aiming to double capacity of a geothermal plant in West Java by 2017.

Elsewhere, chipmakers sagged after Intel Corp , the world's largest chipmaker, forecast gross margins for the current quarter below expectations. Ibiden Co Ltd lost 3.8 percent and Advantest Corp fell 2.2 percent.

Yahoo Japan Corp rose 4.6 percent to 30,050 yen, its highest level since March 2011, as investors hoped that the new services it introduced on Tuesday as part of an ongoing tie-up with Facebook Inc , would win more users for its portal and search services, increasing advertising revenue.

The broader Topix added 1.1 percent to 740.78 in strong trade, with volume at 115.8 percent of its average over the past 90 sessions.

(Editing by Eric Meijer)

Source: http://news.yahoo.com/nikkei-rises-one-week-high-soft-yen-brighter-081953268--sector.html

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