Friday, September 27, 2013
STOCK FOCUS: Tankan May Boost Capital Spending-Related Stocks
TOKYO (NQN)--Market analysts predict the Bank of Japan's tankan survey for the quarter ending September will improve for the third straight quarter thanks in part to the weaker yen lifting corporate profits.
The diffusion index of business sentiment among large manufacturers, to be released on Oct. 1, is seen as a key factor in the government's decision on whether to raise the consumption tax rate as scheduled next April.
Takashi Oba, senior strategist at Okasan Securities Co., forecasts that stocks linked to capital investment will attract more buyers if the September tankan confirms a recovery in corporate appetite for capital spending. Those stocks have been steadily rising since the beginning of September, with both retail and institutional investors chasing after them, Oba said.
Market players are focusing more on future sentiment than on the current mood because companies will see their stocks rise further if a future recovery in their industry appears more definite, Oba said. With that taken into consideration, investors are looking closely at how business sentiment among steel and other material industries will change as European and Chinese economies begin to bottom out, Oba said.
If the government officially decides to raise the consumption tax rate, Oba thinks related economic measures to be introduced will draw investor attention. Stocks may rise depending on what those measures contain. Oba forecast that Tokyo stocks will likely rise gradually, with the Nikkei Stock Average set to surpass the year-to-date closing high of 15,627, logged on May 22, in November.
Takashi Hiroki, chief strategist at Monex Inc., forecast that the September tankan will show improved business sentiment in line with the weaker yen and the uptrend among stocks. Hiroki noted that investor interest was beginning to shift from the results of the tankan itself to the government's subsequent decision on the consumption tax rate. While many feel the tax hike has already been factored in, Hiroki thinks overseas investors will be pleased and start buying Japanese stocks if the tax increase is officially announced by the government. Hiroki estimates that the benchmark Nikkei average will likely surpass 15,000 in October and trade in that range for some time.
The announcement on Sept. 8 that Tokyo will host the 2020 Summer Olympics boosted expectations of an economic recovery, which may push up the diffusion index for the recent quarter, Hiroki said. He added that investors will probably buy stocks linked to capital investment because companies may be more willing to invest.