Reuters
Asian Markets
CORRECTED-Nikkei hovers at 33-month highs on U.S. recovery signs, weak yen
Sun, Feb 03 22:03 PM EST

(Corrects spellchecker errors in 4th, 5th, 10th, 13th and 14th paragraphs) * Panasonic soars 13 pct after posting Q3 profit * Financials in focus, profits benefit from booming stock market * Yen softens further, at 33-month low By Sophie Knight TOKYO, Feb 4 (Reuters) - Japan's Nikkei share average climbed to a fresh 33-month high in early Monday trade, with consumer electronics in the spotlight on the back of a recovery in the third quarter, and a softer yen keeping exporters ahead of the market. Panasonic Corp shot up 13.7 percent to a seven-month high after the consumer electronics maker rebounded to a quarterly profit and stuck with its full-year earnings forecast. It was the second-most traded stock on the main board by turnover.

The Nikkei added 0.2 percent to 11,208.73, coming away from a fresh 33-month high of 11,270.56 struck earlier in the session after U.S. data showing steady job creation and strong growth in the manufacturing sector helped strengthen the dollar against the yen. The Japanese currency, already on rapid downtrend due to an aggressive campaign of fiscal and monetary expansion from new Japan Prime Minister Shinzo Abe, slumped to a fresh 33-month low of 92.83 versus the greenback by Monday morning before the stock market opened, later paring losses to reach 92.67. "If the yen gets to 95 by the end of March, carmaker and other exporters are definitely going to beat their forecasts with revenue from their U.S. subsidiaries," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities.

Mazda Motor Corp and Nissan Motor Co Ltd rose between 2.3 percent and 2.9 percent on Tuesday morning.

"But for the moment management are being cautious with their exchange rate assumptions, so I expect the Nikkei to take a breather after their results this week." Optimism that a weaker yen will swell exporters' revenues has driven the Nikkei up 30 percent since mid-November, when Abe, then candidate for opposition leader, began calling for a softer currency, as well as aggressive monetary policy to boost Japan out of deflation.

That has been a boon for exporters, whose overseas revenues are higher once repatriated, while the deflationary trade and a booming stock market have also prompted investors to single out financials over the past 2-1/2 months, propelling the Nikkei to 12 straight weekly gains on Friday.

Mitsubishi UFJ Financial Group gained 2 percent after its third-quarter net profit doubled, while CLSA raised its rating to 'outperform' from 'underperform' and hiked its target to 570 yen from 505 yen. Japan's earning season is now in full swing, with Japan Airlines Co Ltd and Hitachi Ltd among those to report after the close on Monday.

However, the last quarter's results have shown little evidence of the exchange rate's benefits, with two-thirds of the 77 Nikkei companies reporting so far missing analysts' estimates, according to Thomson Reuters Starmine.

"There have been two very different reactions to bad results: one, the stock is simply sold off, or two, it is bought up because there's positive signs of what's to come," said Masayuki Doshida, senior market analyst at Rakuten Securities.

"So Nintendo was sold off after it cut its forecast even though the yen is weak, but Komatsu was bought up despite cutting its forecast because there's signs of a pick-up in China, where it has high exposure," he added.

There is also optimism that Japanese consumer electronics companies, hurt last year by loss-making TV operations and declining competitiveness due to an irrepressibly strong yen, are beginning to reverse their fortunes.

Panasonic posted an operating profit of 34.6 billion yen ($374 million), up from an 8.1 billion yen loss a year ago, as it moves its business away from loss-making TVs in favour of household appliances. Sharp, meanwhile, eked out a quarterly operating profit on Friday, improving its chances of convincing lenders and shareholders that it remains a viable company. Sony Corp, due to report its results on Thursday, was the most-traded stock on the main board by turnover, jumping 5.9 percent. SMBC Friend Securities' Nakanishi said the company is judged undervalued as it was left behind in the recent rally and that its recent gains amount to a "correction". The broader Topix rose 0.6 percent to 947.80 by mid-morning. ($1 = 92.8400 Japanese yen) (Additional reporting by Ayai Tomisawa; Editing by Eric Meijer)


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