Japan's Nikkei average climbed for a second straight session on Tuesday, breaching a key resistance level as it regained some of the ground lost last week, helped by anticipation of upbeat corporate earnings. Market participants said there was cautious optimism ahead of earnings announcements by major Japanese companies this week but it would be the actual results and company guidance about long-term growth potential that would decide whether the benchmark made further substantial gains.
The benchmark Nikkei ended the day up 1.2 percent, or 119.31 points, at 10,464.42. The broader Topix index added 1.3 percent to 929.28. The Nikkei breached two crucial resistance levels, its closely watched 25-day moving average, now at 10,403.61, and then 10,420, where December futures and options prices settled. The market showed little reaction to the Bank of Japan's upward revision to its price forecast for the next fiscal year. The BOJ kept interest rates on hold, as expected.
Financials, property and high-tech shares were among the biggest gainers, with foreign investors detected buying sectors that had fallen prey to profit-taking last week. Last Friday the Nikkei booked its biggest daily fall in two months, mainly hit by worries about monetary tightening in China.
Canon Inc and Kyocera Corp as well as Japan's biggest personal computer firm, NEC Corp, will report earnings this week and could set the tone of the October-December earnings season lasting until early February. Makers of semiconductor manufacturing equipment were higher, with Dainippon Screen rising 4.4 percent to 734 yen after the Nikkei business daily reported the firm saw a 32 percent year-on-year increase in the value of orders in the October-December quarter. The report was also helping other shares in the sector, such as Nikon, which makes steppers, said a trader who asked not to be quoted by name.
Nikon Corp added 4.0 percent to 1,946 yen. Ibiden Co, which supplies IC packages to Intel Corp, added 3.3 percent to 2,794 yen. The banking sector has gained 23 percent since November but is still considered undervalued as its price-to-book ratio stands at 0.7, underperforming the average PBR of 1.2 for the Nikkei 225 components. A share is typically seen as undervalued if the PBR is below 1.0.
Dividend yields at Japanese banks, at 2.8 percent, are also seen as relatively attractive compared with the average of 1.6 percent for Nikkei components. Trading volume held steady with around 2 billion shares changing hands on the Tokyo Stock Exchange's main board, slightly below last week's daily average of 2.15 billion. Advancing issues outpaced decliners by 1386 to 187.
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