Japan’s short but intense first-half results season will this week confirm that a broad recovery in corporate profits remains intact.
But analysts are anxious for guidance on whether the strong yen will hurt exporters in the run-up to Christmas.
EDITOR’S CHOICE
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Japan’s tech trade tumbles - Oct-21
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“Guidance for the second half will be important in determining whether the market can resume a sustainable uptrend,” Kathy Matsui and Hiromi Suzuki, Goldman Sachs strategists, wrote to clients.
The earnings season, with more than 400 companies reporting on Friday alone, is expected to show the breadth of the recovery in the technology sector after strong results from US technology blue chips such as Apple and Microsoft.
Strategists have reason for confidence on improved earnings.
Japanese industrial production “has risen 7 per cent quarter-on-quarter, leading us to expect manufacturing operating leverage to again be the dominant driver of the results season”, according to strategists at Macquarie Securities in Tokyo.
Manufacturers make up a large part of the Japanese stock market. Because of the high fixed cost of factories and equipment, their profits are sensitive to even small changes in production and sales.
There is evidence that stimulus moves such as car scrappage programmes and Japan’s eco-points scheme for consumer durables have helped sales.
Shipments of flat-panel televisions in Japan were up 32.4 per cent in September on the previous year, according to the Japan Electronics and Information Technology Industries Association.
There have also been relatively few revisions to formal earnings forecasts.
Aggressive cost-cutting by Japanese companies is expected to have helped profit, if not a sustained recovery.
However, other sectors are continuing to suffer.
The motor industry, one of the worst hit by the plunge in global demand, is expected to see further losses.
Honda Motor, which has focused on small, fuel-efficient vehicles, has weathered the crisis better than most. Among the country’s top three producers, it alone is believed to have earned a small net profit.
Investors are likely to focus on carmakers’ full-year forecasts, which most analysts expect to be revised upward across the sector from the dismal figures projected at the start of the financial year.
In August, Toyota, the world’s biggest car manufacturer, cut its forecast net loss for the year to the end of March 2010 from Y550bn ($6bn) to Y450bn.
But analysts believe its loss will be smaller.
The strength of the yen remains a concern across all sectors.
The yen traded at an average Y93.7 to the dollar during the quarter, stronger than the level assumed by many Japanese companies for their profit forecasts.
With the currency trading at Y92, investors want to know what the effect will be on full-year profits.
But analysts are anxious for guidance on whether the strong yen will hurt exporters in the run-up to Christmas.
EDITOR’S CHOICE
JAL poised to receive $6bn long-term aid - Oct-22
Japan’s tech trade tumbles - Oct-21
Onward to a hybrid future at Toyota - Oct-21
“Guidance for the second half will be important in determining whether the market can resume a sustainable uptrend,” Kathy Matsui and Hiromi Suzuki, Goldman Sachs strategists, wrote to clients.
The earnings season, with more than 400 companies reporting on Friday alone, is expected to show the breadth of the recovery in the technology sector after strong results from US technology blue chips such as Apple and Microsoft.
Strategists have reason for confidence on improved earnings.
Japanese industrial production “has risen 7 per cent quarter-on-quarter, leading us to expect manufacturing operating leverage to again be the dominant driver of the results season”, according to strategists at Macquarie Securities in Tokyo.
Manufacturers make up a large part of the Japanese stock market. Because of the high fixed cost of factories and equipment, their profits are sensitive to even small changes in production and sales.
There is evidence that stimulus moves such as car scrappage programmes and Japan’s eco-points scheme for consumer durables have helped sales.
Shipments of flat-panel televisions in Japan were up 32.4 per cent in September on the previous year, according to the Japan Electronics and Information Technology Industries Association.
There have also been relatively few revisions to formal earnings forecasts.
Aggressive cost-cutting by Japanese companies is expected to have helped profit, if not a sustained recovery.
However, other sectors are continuing to suffer.
The motor industry, one of the worst hit by the plunge in global demand, is expected to see further losses.
Honda Motor, which has focused on small, fuel-efficient vehicles, has weathered the crisis better than most. Among the country’s top three producers, it alone is believed to have earned a small net profit.
Investors are likely to focus on carmakers’ full-year forecasts, which most analysts expect to be revised upward across the sector from the dismal figures projected at the start of the financial year.
In August, Toyota, the world’s biggest car manufacturer, cut its forecast net loss for the year to the end of March 2010 from Y550bn ($6bn) to Y450bn.
But analysts believe its loss will be smaller.
The strength of the yen remains a concern across all sectors.
The yen traded at an average Y93.7 to the dollar during the quarter, stronger than the level assumed by many Japanese companies for their profit forecasts.
With the currency trading at Y92, investors want to know what the effect will be on full-year profits.
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