Nikkei books highest close in three weeks

01 Aug, 2006

The Nikkei average booked its highest close in three weeks on Monday, rising 0.74 percent as Canon Inc continued to gain after posting strong quarterly results. Shares of TDK Corp and other exporters were boosted after US economic data eased concerns about further rate increases in the key US market.
Stronger-than-expected quarterly earnings were helping to boost the Tokyo market, said Hiroyuki Fukunaga, chief strategist at the research division of Rakuten Securities.
"While the market had been expecting earnings to be somewhat poor, companies have been reporting fairly good results. With such decent numbers, it is now possible to have further expectations for earnings ahead," he said.
The market was also helped after US gross domestic product data showed the world's largest economy slowed more than expected in the April-June quarter, easing concerns about further rises in interest rates in a key market for Japanese goods.
"The possibility of further rate increases has retreated somewhat," Fukunaga said. Higher US rates are seen as a negative for Japan's exporters, as they eat into consumer spending. The Nikkei ended the day 113.94 points higher at 15,456.81, its highest finish since July 11. The broader TOPIX index was up 0.81 percent at 1,572.01.
Canon, the world's largest digital camera maker, gained 0.9 percent to 5,510 yen. It has now gained some 2.2 percent since posting stronger-than-expected quarterly results on Thursday. Electronic components maker TDK rose 1.5 to 8,960 yen. The Nikkei's advance was aided by a rise in the small-cap Mothers market for start-ups, said Ken Masuda, a senior dealer in equities at Shinko Securities.
"This is the interesting thing about the Japanese market - even though the Mothers' market capitalisation is only something like one hundredth of the Nikkei's, many investors have some holdings on the Mothers. When the Mothers gains, it helps sentiment on the broader index."
Individual investors, seen as an increasingly important part of the Tokyo market, have been hit badly by steep losses in the Mothers and other small-cap markets this year.
The Mothers rose for the third straight session, finishing up 3.30 percent. It has lost nearly 19 percent this month and 54 percent so far this year. The close of trade was quickly followed by another round of quarterly earnings results, including those from electronics firm Toshiba Corp Toshiba posted a better-than-expected quarterly profit, boosted by strong demand for flash memory chips. It also stuck by its full-year forecast for double-digit gains in operating profit.
But Marc Desmidt, head of the Japanese large-cap equity team at Merrill Lynch Investment Managers, said he was worried about price competition in NAND-flash memory as well as Toshiba's acquisition of power plant firm Westinghouse.
"Volumes are good, but I think the pricing environment might get a bit weaker. You're seeing a bit of a slowdown with Apple," Desmidt said, referring to Apple Computer Inc, which uses flash memory in its popular iPod music players.
Nippon Electric Glass Co Ltd jumped 11.6 percent to 2,560 yen after it posted strong first-quarter results and raised its half-year net profit estimate by 7 percent thanks to higher demand for flat-panel display glass.
But shares of Yamato Holdings Co Ltd dropped 8.5 percent to 1,690 yen after Japan's leading parcel delivery firm posted a lower profit for the latest quarter and slashed its forecast for the six months to September.
Trade was moderately active, with 1.69 billion shares changing hands on the Tokyo exchange's first section, compared with last week's daily average of 1.53 billion. Gainers outnumbered decliners by a ratio of 4 to 1.

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