July 26, 2018 / 7:08 AM / 2 months ago

Japan shares mostly higher on solid earnings

* Topix closes at 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 closed higher on Thursday on upbeat earnings and easing concerns about trade tensions, though the Nikkei benchmark softened on speculation the central bank might trim buying of exchange traded funds linked to the index.

The broader Topix ended the day at five-week highs at 1,765.78, rallying 0.7 percent, with more than 1,700 out of 2,100 listed shares posting rises.

Of Tokyo’s 33 sub-indexes, 30 ended the day in positive territory.

“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 closed 6.28 percent higher as the maker of chip-making machines reported profit in April-June was more than seven times the year-earlier level.

Shin-etsu Chemical gained 1.57 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 shed 0.12 percent to 22,586.87 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 ended 1.82 percent lower, extending its fall this week to 8.3 percent.

Other Nikkei heavyweights fell with Softbank down 3.3 percent and Fanuc 3.65 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 10.09 percent after it presented detailed data on its Alzheimer’s drug. (Additional reporting by Daniel Leussink; Editing by Richard Borsuk and Sam Holmes)

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