Nikkei logs best January gain in 15 years, financials lead

Thu Jan 31, 2013 2:34am EST

* Nikkei posts best January performance since 1998
    * Nikkei climbs to new 33-month high
    * Lender SMFG jumps after 9-mth earnings top full-year
f'cast
    * Nintendo sags after forecasting 2nd year of loss

    By Ayai Tomisawa
    TOKYO, Jan 31 (Reuters) - Japan's Nikkei share average edged
up on Thursday, posting its best January in 15 years as gains in
the banking sector lifted sentiment, offsetting gloomy earnings
from such bellwether companies like Nintendo Co.
    The Nikkei ended up 0.2 percent at a new 33-month
high of 11,138.66 points and posted a 7.2 percent gain this
month, its strongest January performance since 1998 after
rallying 22.9 percent in 2012.
    Analysts said that global cyclical companies such as
exporters may continue to disappoint the market with gloomy
earnings for the Oct-Dec period. They also said they do not have
overly high expectations most exporters would immediately gain
from the recently weak yen and raise their full-year forecasts. 
  
    In the meantime, stocks that could benefit from Japan Prime
Minister Shinzo Abe's reflationary policies will likely be in
demand, analysts added.
   "Domestic-sensitive shares are playing catch-up with
exporters which have enjoyed sharp gains," said Kyoya Okazawa,
head of global equities at BNP Paribas. "When investors are
hopeful that the rally will be a long-term one, their focus will
shift to domestic-sensitive shares from global cyclical stocks."
    Banks were notable gainers on Thursday, with Sumitomo Mitsui
Financial Group climbing 5.2 percent after its
ninth-month earnings handily beat its operating profit forecast
for the full-year ending March. 
    "Securities and banking stocks lent support to Topix. SMFG's
positive earnings results have encouraged investors to buy
banking stocks. Expectation for earnings of major brokerages,
such as Nomura and Daiwa, are also high," said Masayuki Otani,
chief market analyst at Securities Japan.
    Rivals Mitsubishi UFJ Financial Group and Mizuho
Financial Group rose 3.6 percent and 2.8 percent,
respectively.
    Nomura Holdings Japan's top brokerage, added 2.1
percent ahead of its results. Japan's largest investment bank
posted a 12.8 percent rise in quarterly profit on Thursday after
the closing bell, helped by the recent rally in Japanese shares,
cost-cutting, and a large one-off investment gain.
 
    The broader Topix gained 0.6 percent to 940.25 in
active trade, with 3.75 billion shares changing hands, higher
than last week's average daily trading volume of 3.44 billion
shares.
   
    WEAK-THAN-EXPECTED RESULTS 
    Despite the weaker yen, companies have so far reported
lacklustre earnings for the October-December quarter. Of the 26
Nikkei companies that have announced quarterly results so far,
nearly two-thirds have missed market expectations, according to
Thomson Reuters StarMine. That compared with 56 percent in the
previous three months.
    An operating loss warning from video game maker Nintendo Co
Ltd caused its shares to drop 4.6 percent while
chip-making equipment maker Advantest Corp shed 1.8
percent after it cut its full-year operating profit forecast.
    Nintendo said it would post an operating loss for a second
straight year as sales of the Wii U, the successor to its Wii
console, faltered. 
    "Nintendo's results were disappointing," said Fujio Ando, an
analyst at Chibagin Securities. "With the yen weakening sharply,
the market had been expecting that the value of the company's
foreign assets would be raised."
    The softer yen, which is expected to boost exporters'
earnings, has lifted the appeal of Japanese equities, with
foreign investors remaining net buyers last week for an 11th
consecutive week. They bought a net 248.6 billion yen ($2.73
billion) worth of equities in the week through Jan. 26, data
from the Ministry of Finance showed.
    But analysts said that poor earnings and conservative
full-year forecasts could put a pause on the rally in the
short-term as recent gains in the Japanese market have made
valuations slightly more expensive than their U.S. peers.
    The Topix carries a 12-month forward price-to-earnings ratio
of 13.4, versus the U.S. S&P 500's 13.3 and the
pan-European STOXX Europe 60's 11.9, data from Thomson
Reuters Datastream showed.
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