Nikkei edges up after strong China data

Thu Jan 24, 2013 3:32am GMT

* China factory growth at 2 yr high supports market
    * Apple suppliers mostly recover after hit from iPhone sales
    * Toshiba favoured on news of GE thermal energy tie-up

    By Sophie Knight
    TOKYO, Jan 24 (Reuters) - Japan's Nikkei share average edged
up by on Thursday morning after strong China data helped firms
with high exposure to the world's second-largest economy, while
Japanese suppliers to Apple Inc mostly recovered after
a drop on disappointing iPhone sales figures.
    The benchmark kicked into positive territory after data
showed growth in China's factory sector hit a two-year high in
January, helping Komatsu Ltd advance 1.1 percent, while
the Nikkei China 50 outperformed with a gain of 0.5
percent. 
   The HSBC flash purchasing managers' index (PMI) rose to 51.9
in January, the highest since January 2011 and above the
50-point level that shows accelerating growth in the sector from
the previous month. 
    By the midday break, the Nikkei had edged up 0.4
percent to 10,524.74, breaking back above the 10,500 level after
hitting a three-week closing low on Wednesday in its third
straight day of declines.
    "China helped, but basically three days of losses has
created a nice dip-buying opportunity. It's very easy to get in
there today," said Masato Futoi, head of cash equity trading at
Tokai Tokyo Securities.
    "The underlying tone is still bullish, so even bad news
about Apple or whatever doesn't hit stocks too hard." 
    After coming under pressure in early trading, Apple
suppliers Murata Manufacturing Co Ltd, Foster Electric
Co Ltd and Taiyo Yuden Co Ltd were up by the
midday break. However, Ibiden Co Ltd, which makes
printed circuit boards for the iPhone, slid 4.4 percent.  
    Apple said it had shipped 47.8 million iPhones in the
December quarter, below the roughly 50 million predicted by Wall
Street analysts, which sent its shares skidding 10 percent in
extended trading as investors cut their exposure to the stock. 
    The iPhone has been outpaced by competitor and supplier
Samsung Electronics Co Ltd's Galaxy Note II, now the
world's most popular smartphone, whose sales contributed to an
89 percent rise in the Korean company's operating profit in the
December quarter. 
    Wacom Co Ltd, the maker of the Galaxy's
touchscreen, jumped 8.4 percent after hiking its full-year
operating profit forecast by nearly a fifth to 7.8 billion yen
($88 million), citing strong sales on the back of a weaker yen. 
    Quarterly earnings figures are beginning to trickle in, with
Japan's earnings reporting moving into higher gear next week.
    "There's a lack of incentives at the moment as everyone is
waiting for the results," said Masayuki Doshida, senior market
analyst at Rakuten Securities.
    Yaskawa Electric Corp fell as much as 8.8 percent
to a one-month low after the company reported a 39 percent drop
in operating profit in the nine months to December, hurt by weak
demand for servo motors in China and Europe. By midday it had
pared some of the loss, down 3.5 percent at 798 yen.
    Toshiba Corp was also in focus, gaining 1.6 percent
after the Nikkei business daily said it will discuss forming a
joint venture with General Electric Co to develop and
sell combined cycle gas turbines. 
    
    WHERE TO NOW?
    The Nikkei has dropped 3.9 percent from a 32-month high of
10,952.31 hit on Jan. 15, the peak of a steep rally starting in
mid-November, when Shinzo Abe, who became prime minister after
winning a landslide election victory in December, began calling
for a weaker yen and aggressive monetary easing. 
    The Bank of Japan responded to pressure from Abe by
announcing a 2 percent inflation target at its policy meeting on
Tuesday. It also committed to open-ended easing from 2014, a
decision that disappointed some investors hoping for more
immediate action.
    "The market is going to be boxed in for a while as it
changes from a speculative market to one based on fundamentals.
We have to wait to see (the weaker yen) reflected in company
profits," Futoi of Tokai Tokyo Securities said. 
    Many analysts are still bullish on the Japanese market,
including those at Goldman Sachs, who said the Topix index could
rise as high as 1,270, or 43 percent above its current level, if
the yen weakened to 100-110 against the dollar, in a report
published on Thursday.
    The broader Topix edged up 0.2 percent to 889.39 on
Thursday morning.
    Goldman Sachs revised its official 12-month estimate for the
index to 1,100 to 1,000, assuming 88 yen to the dollar, saying
that the economy should be given a boost by the 10 trillion yen
($113 billion) fiscal stimulus plan announced by the Abe
government.
    "While foreign buying has accelerated, total cash and
futures buying is not yet excessive, and while 'underweight
Japan' gaps have narrowed, most international equity funds
remain underweight," the report said. ($1 = 88.88500 Japanese
yen)
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