Nikkei edges higher as futures rise; IHI soars

By Rika Otsuka

TOKYO (BestGrowthStock) – Japan’s Nikkei stock average inched up 0.4 percent on Tuesday after it found solid support at its 25-day moving average around 11,100, while investors picked up stocks with improved earnings guidance.

IHI Corp (7013.T: ) surged 9.3 percent after it beat expectations by lifting its net profit estimate for the past financial year to 17 billion yen ($180.8 million) from 7 billion yen.

But gains in the overall market were limited, with investors mainly focusing on individual stocks that have reported better-than-expected profits or revised up earnings guidance. Indeed, declining shares outnumbered advancing ones by 957 to 595.

The Nikkei received additional help from buying in futures that were suspected to be from overseas accounts such as trend-following CTAs.

“Stock futures boosted the Nikkei,” said Shinji Igarashi, equity manager of the sales department at Chuo Securities.

“Foreign players might be increasing Japanese share holdings as the stock market here is lagging a rally in U.S. stocks (Read more about the stock market today. ) that are at 19-month highs.”

The benchmark Nikkei (.N225: ) finished up 46.87 points to 11,212.66. It had slipped in early trade as players booked profits a day after it jumped 2.3 percent — its biggest one-day percentage rise in two months.

But the Nikkei stopped falling around the level of its 25-day moving average, one of Tokyo investors’ favorite technical indicators.

Falls much below 11,100 are unlikely, but should this happen, support is seen holding at 10,800, roughly a 38.2 percent retracement of a two-month rally that started in early February and pushed the Nikkei up to an 18-month peak of 11,408.17 in early April.

Some 2.2 billion shares changed hands on the Tokyo exchange’s first section, the highest volume in a week.

Market players said investors were reluctant to buy actively ahead of key events this week, including the Federal Reserve’s two-day policy meeting and the release of first quarter U.S. growth data.

Few expect the Fed to raise rates at the meeting, but a lot of attention will be paid to their statement for hints about when a rate hike could be expected, and whether that sets a new direction for the dollar against the yen.

One trigger for stock selling could be a stronger yen, analysts said. Investors fret about a stronger yen because it eats into exporter profits when repatriated.

The euro fell (Read more about the trembling euro. ) sharply on Monday after uncertainty about the timing of a bailout for Greece triggered a broad selloff, but market players in Tokyo said this was likely to be the limit of the Greece fallout on shares for now.

EARNINGS INCENTIVE

Japan’s earnings season moves into a higher gear this week.

Sharp Corp (6753.T: ), the world’s No. 4 LCD TV maker, announced company results after the bell on Tuesday, saying that it has swung to a quarterly profit on robust sales of display and solar panels. The firm forecast more than a twofold jump in annual operating profit to its highest in three years, beating market expectations.

Sharp finished at 1,254 yen, up 2 percent on the day.

IHI soared 9.3 percent to 188 yen, bringing its total gains over the two days since news emerged about a joint venture with Toshiba Corp (6502.T: ) to 16.8 percent.

“Having a company like this show such solid profits is quite encouraging to others in the market,” said Masayoshi Okamoto, head of dealing at Jujiya Securities.

Fanuc Ltd (6954.T: ) jumped 11.5 percent to 11,670 yen after the industrial robot maker reported on Tuesday full-year results beating analyst estimates and forecast a six-fold jump in operating profit for the first-half of the current financial year thanks to recovery in demand led by China.

Shares of Konica Minolta Holdings (4902.T: ) surged 7.5 percent to 1,255 yen after it hiked its operating profit estimate for the business year ended in March to 43.9 billion yen ($467 million) from 34 billion yen, citing growing demand for copiers and document managing services.

Investing Analysis

(Additional reporting by Elaine Lies; Editing by Joseph Radford)

Nikkei edges higher as futures rise; IHI soars