* Topix hit 5-week high on earnings, easing trade worries
* Advantest, Shin-etsu Chemical gain on earnings
* Nikkei hit by report BOJ could end buying in Nikkei ETFs
* Fast Retailing, Softbank fall in BOJ buying report
By Hideyuki Sano
TOKYO, July 26 (Reuters) - Most Japanese shares gained on Thursday on upbeat earnings and hopes for reduced global trade frictions, though the Nikkei average was dented by prospects the Bank of Japan will cut its buying in the exchange traded funds (ETFs) linked to the index.
The broader Topix rose as much as 0.96 percent to hit five-week highs and ended morning trade at 1,765.10, up 0.66 percent, with more than 1,700 out of about 2,100 listed shares posting rise.
“The market is very strong broadly. The earnings that were published (after market close) yesterday looked all pretty good,” said Hiroki Takashi, chief strategist at Monex Securities.
Advantest jumped as much as 9.1 percent as the maker of chip-making machines reported profit in April-June was more than seven times the year-earlier level.
Shin-etsu Chemical rose 1.2 percent, also on solid earnings. It posted 28.7 percent growth in its operating profits in April-June.
Market sentiment got a boost after U.S. President Donald Trump and European Commission President Jean-Claude Juncker agreed to work toward eliminating trade barriers on industrial goods.
Despite gains for many counters, the Nikkei average dropped 0.10 percent to 22,592.23 after the Nikkei newspaper reported the BOJ will consider reducing its purchase of Nikkei-linked ETFs and increase buying in Topix-linked ones at next week’s rate review.
Many market players have said such a shift would be necessary and inevitable because the central bank is estimated to be holding a large part of the floating shares of Nikkei heavyweights.
Kenji Abe, chief strategist at Okasan Securities, estimates about one-fifth of the BOJ’s stock buying is directed to the Nikkei ETFs.
Fast Retailing is seen as among the most extreme examples. Shingo Ide, chief strategist at NLI Research, estimated that only about 2 percent of its entire shares are floating ones because of the BOJ’s hoarding.
On Thursday, shares of Fast Retailing dropped 1.9 percent, extending its fall this week to 8.3 percent.
Other Nikkei heavyweights fell with Softbank down 2.0 percent and Fanuc 2.3 percent.
Fanuc was hit as its earnings highlighted worries that Chinese customers of its robot products could be slowing orders due to uncertainties over Sino-U.S. trade.
Drugmaker Eisai was the most active on the main board, falling 16 percent after it presented detailed data on its Alzheimer’s drug. (Editing by Richard Borsuk)