Nikkei steady as BOJ hopes offset earnings disappointments

Mon Oct 29, 2012 2:54am EDT

* Honda falls after cutting profit forecast
    * Mobile phone company NTT DoCoMo hits lifetime low
    * Nippon Sheet Glass up, forecast better than expected

    By Sophie Knight
    TOKYO, Oct 29 (Reuters) - Japan's Nikkei share average ended
flat on Monday as disappointment about a profit warning from
Honda Motor Co was balanced by hopes that the Bank of
Japan will substantially expand its easing programme when it
meets on Tuesday.
    Honda fell 4.7 percent in heavy trade after cutting its net
profit outlook for the year by 20 percent to 375 billion yen
($4.71 billion) after sales sagged in China due to a boycott of
Japanese products after a territorial dispute. 
    Toyota Motor Corp, whose sales in China almost
halved in September, reversed early gains to lose 1.6 percent,
and Nissan Motor Co dropped 2.2 percent in anticipation
of similar forecast cuts when they report results next week. 
    "Honda's results had quite a big impact on the market
today," said Hiroyuki Fukunaga, CEO of Investrust. 
    "It was worse than consensus and they cut the number of cars
they are expecting to sell as well." 
    The Nikkei edged down 3.7 points to 8,929.3,
extending a loss on Friday that knocked the benchmark from a
four-week high. The index has been buoyed over the past month by
a softer yen and expectations that the BOJ will expand its asset
purchases by at least 10 trillion yen.
    There are also hopes that the central bank could commit to
injecting cash until inflation reaches 1 percent. 
    Real estate, an industry likely to benefit any further
purchases of real estate investment trusts by the central bank,
was the second-best performing subindex, with a gain
of 1.6 percent.
    "Futures are barely moving and it's very difficult to either
buy or sell today because no one is quite sure of the scale or
the details of the easing," said Fumiyuki Nakanishi, general
manager of investment and research at SMBC Friend Securities.
    Volume was thin, with trading on the main board at just 88.7
percent of its 90-day average.
    "However, if the BOJ were to inject 20 trillion yen, mostly
into bonds, it could soften the yen again," Nakanishi added. A
softer yen boosts Japan's exporters.
    Although the yen firmed slightly over the weekend to 79.6 to
the dollar, Deutsche Securities analyst Taisuke Tanda said in a
note it was still on track to hit 82 against the dollar by
end-2012, due to "the retreat of downside tail risk in Europe
and rising U.S. interest rates as economic indicators improve."
   Mobile provider NTT DoCoMo shed 6 percent to hit a
lifetime low and was the most-traded stock by turnover on the
main board after cutting its full-year operating profit outlook
by 9 percent as it struggles to catch iPhone-selling rivals
Softbank Corp and KDDI Corp.
    "Ultimately we think this proves that unless DoCoMo
introduces the iPhone, the impact on its finances will become
all the greater," said Morgan Stanley MUFG analyst Tetsuro
Tsusaka in a note.
    The stock was the most-traded by turnover on the Topix index
, which lost 0.1 percent to 740.30. 
    
    CORPORATE EARNINGS
    Of the 21 Nikkei companies that had reported results as of
last Friday, 67 percent undershot analysts' predictions,
according to Thomson Reuters' StarMine.
    But market participants say exaggerated pessimism ahead of
the earnings season has meant robust share price gains for quite
a few stocks that did not do worse than analysts' predictions.
    "Earnings are below expectations but because that's priced
in, it's tended to be a case of 'Well, as long as they're not
really bad'," said Tetsuro Ii, CEO of Commons Asset Management. 
    Nippon Sheet Glass Co Ltd rose 3.3 percent after
the Nikkei business newspaper said the company was likely to
post a 3 billion yen ($38 million) operating loss for the second
quarter, smaller than the 4.5 billion yen loss forecast and
narrower than the 8.5 billion yen loss in the first quarter.
    NEC Corp added 5.7 percent after making an
operating profit of 47.4 billion yen for the first half, despite
logging a small operating loss in the first quarter, with
analysts expecting it to now beat full-year guidance.
 
    Nomura Holdings Inc, Renesas Electronics Corp
 and Kansai Electric Power Co Inc are among
companies reporting after the bell on Monday.
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