WK.2(11th – 14th January 2011)
1
The Tokyo Stock Exchange (TSE) was closed for a national holiday on Monday and so Japanese investors had to wait until Tuesday for the chance to react to Friday’s disappointing US payrolls data for December. These showed that the US economy created some 103,000 new jobs last month, far fewer than the consensus figure among analysts for an increase of at least 150,000. Nonetheless, the US unemployment rate still declined to 9.4% from 9.8% in November, although this could be the result of longer-term jobless giving up looking for work and so no longer being counted among the unemployed. Renewed worries over sovereign debt woes in the Euro-zone also weighed on sentiment following media reports of growing pressure on Portugal (from Germany and France) to seek financial help from the European Union (EU) and International Monetary Fund (IMF) so as to prevent the crisis from spreading further. Germany denied the report while, in Tokyo, Finance Minister, Yoshihiko Noda, announced that Japan would purchase about 20% of the bonds to be issued later this month to raise funds to support Ireland. That news, at least, did give a slight boost to the Euro against the Yen on foreign exchange markets and briefly lifted exporters with significant sales to Europe, but the effect was short-lived. Indeed, printer/copier and digital camera manufacturer, Canon, slid 1.4% and Olympus similarly slipped 1.1%. Chipmaker, Elpida Memory, also fell 3.8% on rumours that it made an operating loss of more than Y20 billion in the three months to the end of December because of a sharp drop in prices for dynamic random access memory (DRAM) devices. This compares with a Y30 billion profit in the same period a year ago. Steel producers, however, were in favour after Credit Suisse raised its rating on the sector citing a recovery in demand from China. Nippon Steel, Japan’s biggest steel manufacturer, jumped 3.8% and rival, JFE Holdings, added 2.5%. Similarly, Bridgestone, the world’s leading tyre-maker, advanced 1.8% on a rating upgrade from Goldman Sachs. Among financials, Resona Bank tumbled 7.3% following confirmation that it will proceed with a fresh share offering to raise up to US$8 billion in new funding to repay government bailout funds received earlier. Investors fear dilution effects. Elsewhere, Aeon, Japan’s second-largest retailer, climbed 2.9% on posting a 52% increase in quarterly operating profits for the October – December period and keeping its full-year forecast unchanged. Overall, the Nikkei average closed down 0.3% at 10,511 but the broader Topix index was marginally higher to end the day at 927, its highest finish since last May.
2
A slight weakening of the Yen back to Y83 against the Dollar and Y109 against the Euro underpinned Japanese share prices in trading in Tokyo on Wednesday. Exporters and automakers, in particular, were among the prime beneficiaries. Toyota, the world’s leading car manufacturer, rose 1.3% and rival, Honda, advanced 1.4%. Banks were also in favour as, despite a strong run over the past few weeks, they are still considered under-valued with a price-to-book ratio of just 0.7 against 1.2 for the Nikkei 225 as a whole. Mitsubishi UFJ, Japan’s top lender, jumped 3.6%, Mizuho Financial climbed 3.1% and Sumitomo Mitsui Financial Group (SMFG) added 2.7%. The Nikkei average was largely flat but closed very marginally up at 10,513 while the Topix index gained 0.3% to finish at a fresh eight-month high of 930. Approximately 2.5 billion shares changed hands, a figure well ahead of last week’s average daily volume of 2 billion shares and, indeed, the highest level since December 10. Foreign buyers were especially active.
3
European and US stocks gained overnight after a successful bond auction by Portugal eased concerns about the sovereign debt crisis in the Euro-zone, and this set the stage for a solid advance by Japanese shares in trading in Tokyo on Thursday. Financials, and especially banks, were once more in favour. Mitsubishi UFJ rose 1.3%, Mizuho Financial added 2.4% and Sumitomo Mitsui Financial Group (SMFG) climbed 1.7%. Chuo Mitsui Trust Holdings leapt 5% and Sumitomo Trust & Banking surged 5.3% on strong investor interest ahead of their merger, which will be completed before the start of the new financial year in April. Resource and energy related issues also performed well as oil prices posted 27-month highs and approached US$100 per barrel. Inpex Holdings, Japan’s leading oil and gas exploration firm, advanced 2.1% while, among trading houses, Marubeni gained 2.5% and Itochu jumped 2.9%. Elsewhere, Fast Retailing, operator of the Uniqlo casual clothing store chain, slid 1.2% on announcing a 24-hour delay to the release of its latest earnings report. The Nikkei average closed up 0.7% at a fresh eight-month high of 10,590. The more comprehensive Topix index was ahead 0.9% to finish at 938.
4
Strong results for the October –December period released overnight by US chip giant, Intel, boosted semiconductor-related issues in trading in Tokyo on Friday but failed to lift the overall market. Intel reported quarterly revenues of nearly US$11.5 billion up 8% over the same period a year ago. It also said that 2010 was its most profitable year ever, with net income of US$11.7 billion. Tokyo Electron, one of the world’s leading manufacturers of chip test and production equipment, jumped 3.2% and Disco Corporation, a maker of semiconductor grinding and cutting equipment, climbed 3%. And, elsewhere, Fast Retailing surged 6% after it kept its annual earnings outlook unchanged despite reporting weak sales in the latest quarter. Overall, however, the Nikkei average slipped 0.9% to close at 10,499 and shed 0.4% on the week. The broader Topix index also lost 0.8% to finish at 930. Trading volume was again heavy with some 2.5 billion shares changing hands and active buying from overseas investors.
