Japan Stocks Rise to 6-Month High Amid Earnings as Telcos Gain

  • Coca-Cola West, Kirin advance on talks of an alliance
  • Oil producers and explorers sink as crude trades below $50

Japanese shares extended their rally to a six-month high with reports of positive earnings from NTT Docomo Inc. buoying investor sentiment as the domestic reporting season gathered pace.

The Topix index gained 0.4 percent to the highest since April 27 at the close in Tokyo. Encouraging results from companies including construction firm Hazama Ando Corp. and Nidec Corp. raised optimism about domestic earnings at Japanese firms, with more than 350 companies on the Topix set to report this week. Coca-Cola West Co. and Kirin Holdings Co. rose on talks of a possible tie-up. Mixed forecasts from U.S. industry giants and a slump in U.S. consumer confidence raised concerns over the pace of growth in the world’s largest economy, weighing on shares earlier.

“The market has already priced-in much of the expected slump in earnings due to the yen, and investor sentiment is currently in the process of improving,” said Makoto Sengoku, a market analyst at Tokai Tokyo Research Center. The yen is up about 15 percent this year versus the dollar.

SecurityPercent ChangePrice
Topix+0.4%1,382.70
Nikkei 225+0.2%17,391.84
Yen-Dollar-0.1%104.29

Tokyo shares reversed earlier declines amid speculation of buying by the Bank of Japan, Sengoku said. The central bank bought 70.7 billion yen ($679 million) worth of exchange traded funds not linked to capital expenditure on Monday when the Topix fell 0.2 percent in the morning, but refrained from similar purchases on Tuesday, according to BOJ data.

Telecommunication stocks as a group gave the biggest boost to the Topix as NTT Docomo rose 2.8 percent. NTT Docomo’s group operating profit rose 25 percent to 580 billion yen ($5.56 billion) in the first half from a year earlier, according to a Nikkei newspaper report. Nippon Telegraph & Telephone Corp. advanced 1.4 percent.

Oil explorers declined as crude traded below $50 a barrel amid mounting speculation that Russia won’t join OPEC to curb supply, while weekly industry data showed U.S. crude stockpiles rose. Inpex Corp. slipped 1.2 percent and Japan Drilling Co. lost 0.5 percent. 

Among other stocks with notable moves:

  • Coca-Cola West advanced 3.8 percent after the beverage maker said it is in talks over an alliance with Kirin Holdings, which added 1.8 percent. Nothing has been decided regarding a possible tie-up, both companies said Wednesday in separate statements.

  • Chugai Pharmaceutical Co. lost 2.2 percent after the drugmaker said nine-month operating profit declined 13 percent from the previous year. SMBC Nikko Securities Co. said there was a risk of a more than 15 percent shortfall to the company’s full-year guidance for the exports of an arthritis treatment drug to Roche Holding AG.

  • Nidec advanced 1.9 percent. Daiwa Securities raised their target price on the precision-motors maker. Nidec raised its full-year net income target by 2 percent to 100 billion and lifted its operating profit forecast 3.8 percent to 135 billion yen Monday.

  • Taiheiyo Cement Corp. was the biggest gainer on the Nikkei 225 Stock Average, surging 9.6 percent. The company announced buybacks of up to 2.76 percent of shares and raised its full-year net-income forecast by 37 percent. 

  • Nissin Electric Co. declined 5.5 percent after the power-distribution equipment maker’s revised operating profit forecast missed analyst estimates. 

  • Hazama Ando Corp. rose 5.9 percent after reporting half-year operating profit that beat forecasts. An improvement in the profitability of construction increased the gross profit of completed works.

Japan Post Insurance Co. gave investment outlines Wednesday, saying it’ll boost domestic stock holdings in the second half of the fiscal year started April 1. The company also said it will start in-house stock investments.

Watching BOJ

Earnings are dominating investor interest even as the BOJ meets Oct. 31-Nov. 1 to decide on monetary policy. The overwhelming majority of economists surveyed by Bloomberg News expect the central bank to keep stimulus unchanged this time, while some 35 percent of the analysts polled think that Governor Haruhiko Kuroda is done with adding to stimulus. The Topix has gained 5 percent since the last central bank meeting.

The 25-day Toraku Index, which compares the numbers of advancing and declining stocks on the Japanese benchmark gauge, rose to 146.57 on Tuesday, its highest level in more than two years. A level above 120 is seen by some traders as indicating that shares are poised to fall.

Futures on the S&P 500 Index fell 0.2 percent. The underlying equity gauge declined 0.4 percent Tuesday as disappointing earnings results from fast-food chains to makers of appliances and sports apparel sparked a selloff in consumer-discretionary stocks. Blue chips Caterpillar Inc. and 3M Co. also dropped after cutting their estimates.

U.S. consumer confidence fell more than forecast in October as households became less upbeat about the economy and labor market, figures from the New York-based Conference Board showed Tuesday.

“We continue to be in a wait-and-see mode as earnings are released, and small changes in sentiment are moving the market,” said Naoki Fujiwara, chief fund manager with Shinkin Asset Management Co. in Tokyo.

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