July 30, 2019 / 1:50 AM / 4 months ago

Nikkei rises as investors take weak earnings in stride, techs rally

TOKYO, July 30 (Reuters) - Japanese shares advanced on Tuesday morning, led by technology firms, as investors looked beyond sluggish earnings in the previous quarter and bet on a potential recovery over the coming seasons.

The Nikkei share average rose 0.67% to 21,761.38, edging near its 2-1/2-month high of 21,823 touched last week, while the broader Topix gained 0.5% to 1,576.34.

"I think we are at the final phase of pricing in deteriorating earnings. Investors are starting to see recovery in 2020," said Masayuki Kubota, chief strategist at Rakuten Securities.

"The semi-conductor sector is the easiest example. The inventory adjustment in DRAM and flash memories is coming to an end and we are increasingly starting to see 5G-related demand," he said.

A case in point was chip-making machine manufacturer Screen Holdings, which rose 4.7% even though the company cut its annual net profit estimate by 5.6%, citing weaker sales in its printing-related businesses and rising costs.

Investors were also buying up other tech shares that had been hit by concerns over intensifying frictions between the United States and China over trade and technological issues.

Fanuc Corp rose 3.9% after the robot maker cut its annual profit estimates on uncertainties from trade frictions. But its quarterly results beat analyst expectations, helping to lift its share price.

Hitachi Ltd rose 4.2%, after the manufacturing conglomerate reported a 16.0% fall in quarterly operating profit, due to worsening market for smart phone and car related materials.

Construction equipment maker Komatsu Ltd rose 1.4%, although its April-June profits fell short of analyst expectations to drop 22% from previous year.

Japan's industrial output also fell a bigger-than-expected 3.6% to 1-1/2-year lows in June but that did not shake investors' confidence either.

More companies including Sony, Nintendo and Sumitomo Mitsui Financial Group, are due to announce earnings after market close on Tuesday.

Ahead of that, the Bank of Japan is expected to make its policy announcement later on Tuesday.

While a majority of market players predict no policy change, a small number of them expect the BOJ to make some cosmetic changes to its forward policy guidance in a symbolic gesture of keeping up with easing stances by the Federal Reserve and the European Central Bank.

The Fed is widely expected to cut its interest rates this week for the first time since the financial crisis more than a decade ago. (Editing by Shri Navaratnam)

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