Nikkei average rises

Japan's Nikkei average edged off a one-month closing low on Tuesday, with oil-related shares up on unrest in Egypt and companies with upbeat earnings such as Honda Motor Co finding favour. Gains were limited amid fears that China may embark on further tightening steps ahead of the Lunar New Year holiday that starts on Wednesday and as the yen hovered near a 4-week high against the greenback, pressuring exporters.
Refiners and trading houses rose after Brent crude topped $100 a barrel for the first time since 2008 on Monday, helped by concerns that oil shipments through the Suez Canal could be disrupted if unrest in Egypt spread. But relief that the turmoil did not seem to be escalating helped provide a floor for the market.
"Investors are finally able to focus on corporate earnings and some stocks are set to benefit from expectations for their results and forecasts," said Masumi Yamamoto, a market analyst at Daiwa Securities Capital Markets. Leasing giant Orix Corp also made robust gains after earnings. This week marks the peak for Japan's October-December results season with investors looking for signs of a sustained recovery for blue chip firms.
But Masayuki Kubota, a senior fund manager at Daiwa SB Investments, said although many companies have beat their own earnings estimates, this would not provide too much of a boost to index as their forecasts had been extremely conservative. "This quarter's results are neither good, nor bad - that's why market volatility is going down," he said.
The benchmark Nikkei ended the day up 0.4 percent, or 36.58 points, at 10,274.50, after falling 1.2 percent to a one-month closing low on Monday. The broader Topix advanced 0.4 percent to 913.52. A total of 2 billion shares changed hands on the Tokyo Stock Exchange's main board, in line with last week's daily average volume at 1.9 billion.
Honda climbed 2 percent to 3,545 yen to trade near 28-month highs after raising its outlook above expectations. A recovery in US profitability is putting it on track for its strongest earnings in three years. Some market players held up Honda as an example of a shift towards stocks with high exposure to the US economy. "People are buying Honda because it has the potential to grow over the next year thanks to its high exposure to the US, which is expected to pick up about 10-15 percent in terms of car sales," Kubota said.
US data showing factory activity in the Midwest hit a 22-1/2-year high in January as orders surged and employment prospects brightened, providing further signs that the economy would stay on a solid growth path this year. Although it has outperformed the auto sector recently, Honda's shares still trade at a 26 percent discount to the average forward 12-month price-to-earnings multiple of its peers using Starmine's SmartEstimate, which gives higher weightings to historically accurate and more recent forecasts.
Among exporters, Sony Corp shed 0.5 percent to 2,815 yen and Canon Inc was down 1.4 percent at 3,970 yen. Orix rose 3.7 percent to 8,400 yen after it lifted its annual net profit forecast to 67 billion yen, 11 percent above the market consensus. It was helped by a good performance in its auto leasing and overseas business.
Among energy shares, Japan's top oil and gas explorer, Inpex Corp rose 2.3 percent to 538,000 yen, refiner JX Holdings added 3.1 percent to 572 yen and trading house Mitsui & Co gained 1 percent to 1,394 yen. "If oil prices keep rising, investors may become increasingly alert to the situation in the Middle East. Otherwise, the Nikkei may gradually recoup recent losses and target 10,500," said Yoshito Sakakibara, an economist at J.P. Morgan Asset Management. Advancing shares outpaced decliners 9 to 6.