WK.4(24th – 28th January 2011)
1
Japanese share prices staged a tentative rebound from Friday’s steep falls in trading in Tokyo on Monday. On foreign exchange markets, the Euro hit a two-month high against the Yen, holding comfortably above the Y112 level and providing support for exporters. Consumer electronics and entertainment giant, Sony, advanced 0.9% and machinery manufacturer, Yaskawa Electric, jumped 4.5%. Elpida, the world’s third-ranked producer of computer memory chips, leapt 5.1% following a rating upgrade from Goldman Sachs. Among automakers, Toyota rose 1.3%, Nissan was ahead 0.7%, and Honda added 3.8% on a favourable report from Nomura Securities, which predicted strong sales and earnings in the North American market. Fuji Heavy Industries (FHI), which manufactures cars under the Subaru brand, also climbed 1.3% on rumours that full-year operating profits will be up to three times those of last year, easily beating earlier estimates. But not all exporters gained and those reliant on Chinese demand were held back by continuing nervousness about the possibility of further monetary tightening by the Bank of China to rein in inflation. Komatsu, the world’s second-biggest maker of earth-moving equipment after Caterpillar of the US, slid 1.3% and rival, Hitachi Construction Machinery, slipped 1%. Resource-related issues, however, were back in favour. Japan’s leading oil and gas exploration firm, Inpex Holdings, rose 2.3% and Mitsubishi Corporation, the country’s biggest commodities trader, added 1.9%. Overall, the Nikkei average closed up 0.7% at 10,345. The broader Topix index similarly advanced 0.7% to finish at 917.
2
Share prices gained for a second straight day in trading in Tokyo on Tuesday amid cautious optimism ahead of the latest quarterly earnings announcements from several major Japanese companies scheduled for later in the week. Sony climbed another 2.3% while printer/copier and digital camera maker, Canon, was ahead 0.7%. Machinery and electronics conglomerate, Hitachi, rose 1.3%, NEC added 3.4%, and industrial robot manufacturer, Fanuc, gained 2.4%. Electronic components maker, TDK, advanced 2.5% on rumours that it has developed new modules for smartphones with a 30% reduction in footprint size compared to equivalent devices on the market. Semiconductor related issues, too, performed well after Dai Nippon Screen, a leading manufacturer of chip production equipment, reported a 32% year-on-year increase in the value of orders for the three months through to the end of December. Dai Nippon Screen leapt 4.4% while Nikon, which makes steppers, jumped 4% and Ibiden, which supplies IC packages to Intel, climbed 3.3%. In other sectors, banks were again in favour with evidence of considerable buying from overseas investors. Mitsubishi UFJ, Japan’s largest bank by assets, rose 2.9% and Sumitomo Mitsui Financial Group (SMFG) gained 1.4%. Resona Holdings, however, dropped 5.1% on news that its planned new global share offering would raise less than originally expected in a sign that investors have doubts about the bank’s growth prospects as it comes out from under government control. The Nikkei average had its best day for two weeks and closed up 1.2% at 10,464 while the Topix index was similarly ahead 1.3% to finish at 929.
3
An interest rate hike by the Bank of India led to a pull-back in commodity prices and caused Japanese stocks to decline for the first time in three sessions in trading in Tokyo on Wednesday. Prices for oil and industrial metals dropped, putting pressure on miners and other resource-related issues. Sumitomo Metal Mining shed 2.4%, JX Holdings (which was formed in July 2010 by combining Nippon Oil Corporation and Nippon Mining Holdings) slipped 0.9%, and Inpex Holdings slid 1.3%. In other sectors, construction machinery giant, Komatsu, fell 1.1% despite reports that it is likely to see operating profits triple to around Y220 billion for the full year to the end of March 2011 on strong sales to China and other emerging markets. And Eisai, Japan’s fourth-ranked pharmaceuticals firm, tumbled 5% after saying that late-stage trials for its new sepsis drug, Eritoran, showed no reduction in mortality rates compared with a placebo. Overall, the Nikkei average closed down 0.6% at 10,402. The more comprehensive Topix index lost 0.7% to finish at 923. Trading volume was low with only 1.63 billion shares changing hands against last week’s daily average of 2.15 billion.
4
Upbeat US earnings gave a lift to stocks on Wall Street in overnight trading and provided support for share prices in Tokyo on Thursday. Canon, which was scheduled to post its own quarterly results after the market’s close, rose 2.2% and industrial robot manufacturer, Fanuc, leapt 4.6% following its posting of net profits of Y31 billion for the three months to the end of December, more than double those achieved in the same period a year ago, thanks to robust demand from China. Disappointingly, however, Fanuc kept its full-year forecast unchanged. Resource-related issues were bolstered by firmer oil prices, which headed back towards US$100 per barrel. Inpex Holdings added 2.7% and Sumitomo Metal Mining advanced 1.3%. But there were losers, too. In the financial sector, Resona Holdings, Japan’s fourth-ranked bank, remained out of favour. It dropped another 4.7% and is now trading below the price set for its forthcoming public share offering. The Nikkei average closed up 0.7% at 10,479 while the Topix index was ahead 0.8% to finish at 930.
5
A decision overnight by ratings agency, Standard & Poor’s, to downgrade Japan’s long-term sovereign credit rating a notch from AA to AA- triggered some nervousness among investors and caused share prices to fall in trading in Tokyo on Friday. It was Japan’s first downgrade in nearly nine years but came with a harsh critique of the government’s continuing failure to gain control over its ballooning debt, making pointed reminders about the country’s poor fiscal health, rapidly ageing population, and lacklustre growth prospects amid persistent deflation. Banks immediately came under under pressure. Mitsubishi UFJ shed 2.7%, Mizuho Financial slipped 1.2%, and Sumitomo Mitsui Financial Group (SMFG) slid 1.6%. Elsewhere, stock movements were governed by forecast earnings and results. Advantest, a world-leading manufacturer of test and production equipment for the semiconductor industry, plunged 7.4% on saying that full-year operating profits would be Y7.4 billion, some 40% below analysts’ predictions. Similarly, steel maker, JFE Holdings, dropped 3.3% after cutting its full-year operating profits forecast by 23% to Y170 billion. In contrast, construction machinery giant, Komatsu, climbed 2.3% on posting a five-fold increase in earnings for the nine months through to the end of December on strong sales in China and other emerging markets. Overall, the Nikkei average closed down 1.1% at 10,360 but was still up 0.8% for the week. The broader Topix index also declined 1.1% to finish at 920.
