Japan Stocks Slip Amid Mixed Earnings; Canon Falls, Orix Gains

  • Line, Nintendo decline on poor results; Fujitsu advances
  • More than 350 Topix companies unveil earnings this week

Japan’s Topix index fell from a six-month high as disappointing earnings from companies including Canon Inc. outweighed positive results from Orix Corp. and Fujitsu Ltd.

The Topix retreated from its highest level since April 27 at the close in Tokyo, after fluctuating in a narrow range for most of the session. Investors continue to parse corporate results to gauge the health of Japanese firms, with more than 350 companies on the measure reporting this week. Canon was the biggest drag on the benchmark gauge, while Orix contributed the largest boost. Fujitsu Ltd. advanced the most on the Nikkei 225 Stock Average after reporting positive earnings.

SecurityPercent ChangePrice
Nikkei 225-0.3%17,336.42

“While there’s a lack of reasons for investors to keep buying Japanese stocks, if they fall, there are expectations of buying from the Bank of Japan and it’s difficult to sell,” said Seiichi Miura, a strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “Earnings appear to be starkly separated into two groups: those like Nidec Corp. with good results and those such as Canon with negative ones.”

The BOJ has been stepping in to support the market by buying exchange-traded funds as part of stimulus measures. It tends to step in on days when stocks fall before the midday break and while it doesn’t reveal its purchases until after the close, investors can tell if the BOJ bought by looking at off-exchange cross trades.

Earnings Watch

Canon declined 3 percent after the electronic-appliance maker cut its operating profit forecast. JP Morgan Chase & Co. reduced the rating on the company to underweight from neutral. Consumer lenders were the biggest gainers on the Topix, with Orix surging 8.3 percent after increasing dividends and announcing share buybacks.

Among other significant moves:

  • Fujitsu Ltd. surged 7.8 percent after the semiconductor-equipment maker reported second-quarter net income that beat estimates. The company also said that it’s in talks with Lenovo Group Ltd. on a potential strategic cooperation within the personal computer market.

  • Line Corp. tumbled 6.3 percent after third-quarter operating profit missed analyst estimates. Macquarie Group Ltd. cut its rating on the mobile-messaging app operator to neutral from outperform.

  • Sanyo Special Steel Co. sank 7.4 percent after the steel manufacturer cut its full-year operating profit forecast by 6.5 percent and lowered the interim dividend.

  • Nissin Seifun Group Inc. lost 2.9 percent after the flour maker gave operating profit forecasts Thursday that missed analyst estimates.

  • H2O Retailing Corp. and Kansai Super Market Ltd. rose 2.3 percent and 0.5 percent, respectively. H2O announced after the market close a tie-up agreement with Kansai Super. The Nikkei newspaper had earlier reported that the company plans to acquire a 10 percent stake in Kansai Super.

The consensus forecast for Topix companies, excluding financial firms, with March fiscal year-ends is for recurring profit to drop 18 percent, according to Mitsubishi UFJ Morgan Stanley Securities Co. Of the 32 firms that have reported as of Oct. 26, recurring profit for the latest six months was down 3.7 percent.

“Unless the yen weakens beyond 105 per dollar, the upside is limited,” said Mitsushige Akino, an executive officer at Ichiyoshi Investment Management Co. in Tokyo.

Fed, Election

Earnings are dominating investor interest even as the BOJ readies to meet on Oct. 31-Nov. 1 to decide on monetary policy. Expectations that the central bank will refrain from adding to stimulus for a while is encouraging some investors to take on risk, after they became more aware of the negative effects of the BOJ’s policy, according to Daiwa SB’s Monji. The Topix has gained 5 percent since the last central bank meeting.

Still, investors remain guarded as they await Federal Reserve meetings and as the U.S. presidential race enters its final leg going into the Nov. 8 vote. Traders are pricing in a 73 percent chance that the U.S. will raise borrowing costs by year-end.

Futures on the S&P 500 Index dropped 0.1 percent. The underlying equity gauge declined 0.2 percent Wednesday as corporate reports spurred a tug of war with advances in financial and industrial companies countering losses among health-care and technology shares. A disappointing forecast from Apple Inc. weighed on technology stocks.

— With assistance by Nao Sano

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