* Banks benefit from report of bumper earnings
* iPhone fills out KDDI forecast
* HSBC cuts Japan rating, but BNP sees 13,000 for index
By Sophie Knight
TOKYO, Jan 29 Japan's Nikkei share average rose
on Tuesday morning as investors welcomed news that major banks
will likely see significantly larger profits this year, helping
offset a firmer yen and profit-taking earlier in the session.
Investors have been piling into the Japanese market in the
hope that "Abenomics", prime minister Shinzo Abe's brand of
economic policy involving aggressive monetary easing and a
weaker yen, will boost exporters, financials and real estate.
Sumitomo Mitsui Financial Group (SMFG), Mizuho
Financial Group and Mitsubishi UFJ Financial Group
(MUFG) gained between 3.5 and 4.1 percent after the
Nikkei newspaper said the recent stock rally would boost the
banks' shareholdings and net profit in the current fiscal year.
The banks were three of the top four most-traded stocks by
turnover on the main board for much of the morning.
"Everyone has been speculating on who will benefit from
Abenomics, and banks were one of the candidates. Hearing that
they will actually see those benefits is a big positive for the
market," said Tetsuro Ii, chief executive of Commons Asset
The Nikkei was up 0.6 percent at 10,892.94 by the
midday break after starting weak as investors took profits. The
benchmark grazed 11,000 on Monday for the first time in 32
Investors are now turning their eyes to earnings as the
Japanese season begins in earnest this week.
A rosier outlook for mobile carrier KDDI Corp,
which lifted its full-year forecast by 1 percent to 505 billion
yen ($5.57 billion) as contracts for smartphones have increased
faster than expected, propped the stock up 3.3 percent.
"I think earnings are going to be pretty weak, but most
companies are going to get ignored as most people are looking
forward to improvements in the yen," said a hedge fund manager
who declined to be named.
The yen has slid around 10 percent over the past two
months, signalling improved profits for exporters whose overseas
revenues will increase once repatriated. It firmed against the
dollar on Tuesday to 90.76 versus the greenback.
"There are going to be some bombs, and that will be greeted
negatively, but there's a decent amount of names people are
waiting to buy once the bad news clears out, so I think it will
be better for the markets," said a hedge fund manager who
declined to be named.
Maeda Corp tumbled as much as 13.4 percent to a
10-week low, before paring losses to 11.4 percent down, after
the contractor forecast an operating loss of 7 billion yen, down
from a previous estimate of 5.2 billion yen profit, citing
increased cost of construction materials.
"The two factors to watch now are whether foreign investors,
who drove the recent rally, remain bullish and continue buying,
and whether retail investors continue to buy into emerging
stocks that are relatively immune to the exchange rate," said
Yoshihiro Ito, chief strategist at Okasan Online Securities.
Foreign banks have mixed outlooks on Japan. While BNP
Paribas has raised its target for the Nikkei to 13,000, or 19.8
percent higher than its current level, HSBC shifted Japan back
to "underweight" in its global stocks portfolio after raising it
to neutral in December.
"We feel the excitement over "Abenomics" is now priced in,
and the Bank of Japan has yet again shown it will do nothing
dramatic to end deflation, said Garry Evans, global head of
equity strategy at HSBC, in a note on Monday.
The BOJ announced a 2 percent inflation target at its last
policy meeting on Jan. 22 and committed to buying open-ended
assets, but only from 2014, which disappointed some investors
that were hoping for more immediate action.
Societe General, however, pointed to the heat around
emerging stocks, which market watchers say retail investors have
been piling into, partly because of credit deregulation starting
in January that enabled them to use the same collateral for
multiple margin trades in the same day.
"In Japan, the Nikkei 225 was essentially flat after the
much anticipated announcement from the BOJ proved a bit of a
damp squib. However the Mothers index of small cap companies
continue to fly... yet no one really seems to have noticed,"
said a Societe General note.
The Mothers index, or the "market of the high-growth
and emerging stocks", has risen 48 percent so far this month and
has packed on 72 percent since a low struck in early June 2012.
By mid-morning, the broader Topix was up 0.9 percent
at 921.86. It has outperforming the Nikkei so far this month,
gaining 7.2 percent to the benchmark's 4.8 percent gain.
Despite the recent rally, the Nikkei remains well below the
2008 financial crisis while the S&P 500 Index and
Germany's benchmark stock index have both already exceeded that