Nikkei edges up as strong earnings offset weak industrial output
* Macro funds shift to Japan shares - analyst * Earnings impress investors - analysts By Ayai Tomisawa TOKYO, July 30 (Reuters) - Japan's Nikkei share average edged up to hover at six-month highs in choppy trade on Wednesday morning, as strong corporate earnings led by Honda Motor Co and Tokyo Electron Ltd eclipsed data showing weak industrial output. The Nikkei tacked on 0.2 percent to 15,643.55 in midmorning trade after moving in and out of negative territory. On Tuesday, the index rose 0.6 percent and has been maintaining at levels last seen in the middle of January. Japan's June industrial output fell at the fastest rate since the devastating earthquake and tsunami in March 2011 as companies slowed production to offset a build-up in inventories, official data showed on Wednesday. The weak data was somewhat offset by strong corporate earnings, which bode well for the economy as it steers through temporary dips caused by a national sales tax hike and the fading effects of Tokyo's stimulus measures. Honda jumped 3.6 percent and was the most traded stock by turnover after reporting a 7.1 percent rise in operating profit, beating analyst estimates and lifting its full-year profit forecast to 770 billion yen from 760 billion. Tokyo Electron, which raised its April-September operating profit forecast to 24.5 billion yen from 18.0 billion yen, soared 2.7 percent. "Macro funds including overseas pension funds are shifting to Japanese shares from U.S. shares as valuations of Japanese shares are cheaper," said Kyoya Okazawa, head of global equities at BNP Paribas. On top of that, investors are optimistic that Japanese companies are riding out the impact of the April 1 national sales tax hike, he said. Approximately 25 percent of Topix companies have reported quarterly results, and sales are up 7 percent on year and net income 11 percent higher, according to JPMorgan. "We believe expectations have been relatively muted heading into the first-quarter results due to the tax hike," Patrick Rial, an analyst at JPMorgan, wrote in a report. He said that solid earnings have helped the Topix add 1.3 percent since the July 17 start of quarterly results, while the S&P 500 is unchanged over the same period. Exporters were mixed, with Toyota Motor Corp falling 0.2 percent, Canon Inc shedding 0.4 percent and Panasonic Corp gaining 0.4 percent. The broader Topix was flat at 1,290.78, and the JPX-Nikkei Index 400 was also unchanged at 11,755.91. (Editing by Shri Navaratnam)
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