Nikkei surges to 21 year high on strong corporate earnings

November 1, 2017

TOKYO- Stocks rebounded steeply on the Tokyo Stock Exchange Wednesday, pushing up the benchmark Nikkei average to the highest closing level in 21 years and four months, with investors taking heart from brisk corporate earnings.

The 225-issue Nikkei average jumped 408.47 points, or 1.86 pct, to end at 22,420.08, the highest level since July 1, 1996. On Tuesday, the key market gauge dropped 0.06 point.

The TOPIX index of all first-section issues closed up 20.75 points, or 1.17 pct, at 1,786.71, the best finish since July 10, 2007, after losing 4.88 points the previous day.

Tokyo stocks attracted hefty purchases from the outset of Wednesday's trading after major Japanese companies, including electronics makers, posted robust earnings, brokers said.

Export-oriented issues gained substantial ground following the overnight rise of U.S. equities and the yen's easing against the dollar.

Strong readings of U.S. economic indicators, such as the Chicago purchasing managers index for October and the Conference Board's consumer confidence index for the same month, also backed the Tokyo market's advance by contributing to the yen's weakening, market sources said.

Although agreeing that strong corporate earnings bolstered the market, Ryuta Otsuka, strategist at the investment information department of Toyo Securities Co., indicated that this may be a secondary reason.

"Foreign investors had no choice but to increase purchases, to correct their underweight positions on Tokyo stocks" and catch up with their recent strong performances, Otsuka said.

The victory of Japanese Prime Minister Shinzo Abe's ruling coalition in the Oct. 22 general election and brisk corporate earnings also worked as buying incentives in this situation, Otsuka added.

Meanwhile, Chihiro Ota, general manager for investment research and investor services at SMBC Nikko Securities Inc., stressed that Wednesday's main driving force was solid corporate performances, pointing to a "Sony surprise."

Active trading was led by the electronics maker, which surged in stock prices after its announcement on Tuesday of far-better-than-expected earnings, Ota said.

The nomination of the next U.S. Federal Reserve chief, likely to be announced on Thursday, will attract the attention of market players in Japan as well, Ota suggested.

Rising issues outnumbered falling ones 1,248 to 704 in the TSE's first section, while 80 issues were unchanged.

Volume increased to 2,056 million shares from Tuesday's 1,888 million shares.

Sony soared 11.44 points after announcing on Tuesday that it expects to post the highest group operating profit in 20 years for fiscal 2017.

Semiconductor-related Tokyo Electron and Screen Holdings, airline JAL and power utility J-Power were buoyant after they revised up their earnings outlooks.

By contrast, Murata Manufacturing was downbeat the day after the electronic parts supplier revised down its earnings projection for fiscal 2017.

NGK Insulators met with selling on disappointing earnings forecast for fiscal 2017.

Other major losers included bearing maker NTN, Mitsui Chemicals and Mitsubishi Heavy Industries.

In index futures trading on the Osaka Exchange, the key December contract on the Nikkei average surged 480 points to close at 22,430. Jiji Press