Nikkei rises as investors take weak earnings in stride, techs rally

By Hideyuki Sano
TOKYO, July 30 (Reuters) - Japanese shares advanced on
Tuesday morning, led by technology firms, as investors looked
beyond sluggish earnings in the previous quarter and bet on a
potential recovery over the coming seasons.
The Nikkei share average .N225 rose 0.67% to 21,761.38,
edging near its 2-1/2-month high of 21,823 touched last week,
while the broader Topix .TOPX gained 0.5% to 1,576.34.
"I think we are at the final phase of pricing in
deteriorating earnings. Investors are starting to see recovery
in 2020," said Masayuki Kubota, chief strategist at Rakuten
Securities.
"The semi-conductor sector is the easiest example. The
inventory adjustment in DRAM and flash memories is coming to an
end and we are increasingly starting to see 5G-related demand,"
he said.
A case in point was chip-making machine manufacturer Screen
Holdings 7735.T , which rose 4.7% even though the company cut
its annual net profit estimate by 5.6%, citing weaker sales in
its printing-related businesses and rising costs.
Investors were also buying up other tech shares that had
been hit by concerns over intensifying frictions between the
United States and China over trade and technological issues.
Fanuc Corp 6954.T rose 3.9% after the robot maker cut its
annual profit estimates on uncertainties from trade frictions.
But its quarterly results beat analyst expectations, helping to
lift its share price.
Hitachi Ltd 6501.T rose 4.2%, after the manufacturing
conglomerate reported a 16.0% fall in quarterly operating
profit, due to worsening market for smart phone and car related
materials.
Construction equipment maker Komatsu Ltd 6301.T rose 1.4%,
although its April-June profits fell short of analyst
expectations to drop 22% from previous year.
Japan's industrial output also fell a bigger-than-expected
3.6% to 1-1/2-year lows in June but that did not shake
investors' confidence either.
More companies including Sony 6758.T , Nintendo 7974.T
and Sumitomo Mitsui Financial Group 8316.T , are due to
announce earnings after market close on Tuesday.
Ahead of that, the Bank of Japan is expected to make its
policy announcement later on Tuesday.
While a majority of market players predict no policy change,
a small number of them expect the BOJ to make some cosmetic
changes to its forward policy guidance in a symbolic gesture of
keeping up with easing stances by the Federal Reserve and the
European Central Bank.
The Fed is widely expected to cut its interest rates this
week for the first time since the financial crisis more than a
decade ago.

(Editing by Shri Navaratnam)