tokyo 08 09, 2012, 09:10 IST
Japan's Nikkei share average inched upwards on Thursday morning after mixed data from China kept hopes alive for policy action to tackle the slowdown in the world's second-largest economy and Japan's biggest export market.
Nikon Corp <7731.T> fell as much as 11.8 percent to a six-month low after the camera maker unexpectedly cut its full-year earnings forecast, blaming a strong yen for eroding export revenue.
The Bank of Japan also held fire on extra monetary easing steps during the midday trading break, and kept its economic outlook the same, saying that Japan's economy was starting to pick up moderately.
The Nikkei <.N225> crept up 0.4 percent to 8,918.94, staying above its 75-day moving average at 8,798.68 but stopping short of its 200-day moving average at 8,956.20.
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After seesawing in early trade the benchmark index put in a modest gain after China said its annual rate of consumer price inflation fell to a 30-month low of 1.8 percent in July, down from June's 2.2 percent increase, but a whisker above consensus market forecasts for a 1.7 percent rise.
Producer prices also fell more than expected in July, while the consumer price index rose 1.8 percent, a big pullback from last July's three-year high of 6.5 percent, bolstering hopes for easing moves from China's central bank to stimulate growth.
"There's now a very high chance that China will come up with a new economic policy this year," said Makoto Kikuchi, chief executive of Myojo Asset Management Japan, contrary to those who believe that an imminent leadership changeover will prevent any significant political shift.
"They have already exhausted investment into infrastructure but increasing consumer credit is still on the table, although too much would exacerbate Chinese banks' amount of bad debt." Kikuchi added.
Construction machinery maker Komatsu Ltd <6301.T>, often used as a barometer of the strength of the Chinese economy due to its dependence on the country's market, was down 0.1 percent.
Traders are also angling for Friday's settlement of a slew of options, known as a 'special quotation'.
"I think the three levels people are aiming at are 8,500, 8,750 and 9,000," said Masayuki Doshida, senior market analyst at Rakuten Securities. "The yen is relatively soft today which will help, and sentiment isn't all that bad, so it's more likely to be the latter two."
Gains were curbed, however, as Nikon sagged 8.1 percent as the most-traded share on the main board, after cutting its operating profit guidance by 5.6 percent to 85 billion yen.
JPMorgan reaffirmed its target price of 3,200 yen and "overweight rating", saying Nikon likely cut guidance to hedge against potentially poor results in the second half of the year due to slowing global demand.
"Historically, Nikon has tended to fully discount potential risks and underestimate the impact of positive factors," JPMorgan analyst Hisashi Moriyama wrote in a note, saying that while sales of SLR cameras were projected to rise, the company had forecast a 20 billion yen decrease in total sales.
"We think this is because management is reflecting macroeconomic risks in its price assumptions," Moriyama added.
The result is the latest disappointment in a weak quarterly earnings season, with 53 percent of the 138 Nikkei companies having undershot market expectations, compared with 40 percent in previous quarterly earnings, data from Thomson Reuters StarMine showed.
Sanken Electric Co Ltd <6707.T> also suffered a 7 percent drop to a two-month low after it said orders were dropping at its U.S. subsidiary and that Chinese demand for fan motors had stagnated, even though its results for the April-June quarter were in line with guidance.
Oki Electric Industry Co Ltd <6703.T> suffered a sharp fall of 32.8 percent after the telecommunications equipment maker said it had discovered inappropriate accounting practices at its Spanish subsidiary Oki Systems Iberica, which could result in losses of about 8 billion yen over several years.
The Nikkei is up 4.3 percent on the week, propelled by fresh hopes for further stimulus from the United States and as global equity markets have rallied, while a softer yen against the dollar and euro has lent support.
However, the benchmark index is still 2 percent down from a two-month high hit on July 4.
The broader Topix index <.TOPX> edged up 0.2 percent to 747.32 in moderate trade, with volume at 55.2 percent of its full-day average for the last 90 days.