Tokyo Shares Rise as Banks Rally, Outshining Chip Sector Decline

  • Gauge of banks rises 1.8% for biggest gain in five weeks
  • Upbeat corporate earnings reports likely to continue: Nomura

BlackRock Sees Further Upside for Asia-Pacific Equities

Shares in Tokyo rose for the first time in three days as a rally in banks and retail companies backed by earnings optimism helped offset declines in the technology sector.

The Topix Banks Index rose 1.8 percent, as Sumitomo Mitsui Financial Group Inc. jumped after posting a 31 percent increase in net income for the June quarter. Start Today Co. fueled gains for retail stocks after reporting first-quarter operating profit surged 59 percent. With the local earnings season at its peak, more than 1,000 companies on the Topix are scheduled to release quarterly results by the end of next week. 

“With just the first fiscal quarter results in, companies that are raising their annual forecasts stand out,” said Takahisa Odaka, an equity market strategist at Nomura Securities in Tokyo. “It looks like we can expect better-than-expected earnings from upcoming company reports.”

The technology sector, meanwhile, weighed on the broader market as the yen held gains against the dollar and as caution kicked in among investors over the chip industry’s outlook. The U.S. semiconductor sector was downgraded to market weight from overweight at Wells Fargo on the view that growth will likely plateau or decelerate over the next few months.

“Institutional investors appear to be re-balancing some of their investments in Japanese semiconductor equipment makers,” said Iwai Cosmo Securities senior analyst Kazuyoshi Saito. The market may be getting wary over the odds of a peak-out in chip prices, but any correction is likely to be contained, he added.

Summary

  • Topix +0.6% to 1,628.50 at close in Tokyo
  • Nikkei 225 +0.3% to 19,985.79
  • Yen little changed at 110.27 per dollar after touching 110.22 Monday, its strongest level since June 14
  • Banks: Sumitomo Mitsui Financial +2.3%, Mitsubishi UFJ Financial Group +2.2%
  • Retail: Start Today +9%, Nitori Holdings +1.7%
  • Technology stocks underperform: Hitachi Ltd. -2.9%, Seiko Epson -3.8%, Tokyo Electron -2.5%, Taiyo Yuden -5.7%
  • Nippon Kayaku +9.5%, best performer on Nikkei 225, after reporting 1Q operating profit +26% y/y to 6.2b yen
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