Tuesday, October 1, 2013
STOCK FOCUS: Nikkei Seen Reaching 18,000 In Months Ahead
TOKYO (NQN)--Tokyo stocks kicked off the second half of fiscal 2013 on a positive note Tuesday, with the Nikkei Stock Average opening in the black. Major near-term focuses among investors will be how the April consumption tax hike impacts the economy and how the U.S. tackles its fiscal issues.
There are also many factors at home and abroad that could have considerable sway over the markets over the medium term, and market players are curious about how Japanese stocks will move in the second half through March 2014.
Yasuo Sakuma, executive officer at Bayview Asset Management Co., said such factors as Tokyo's success in its bid to host the 2020 Summer Olympics and the U.S. Federal Reserve Board's decision not to begin cutting its bond purchases had a positive impact on Japanese stocks in September. From October through November, however, Sakuma predicts Japanese stocks may enter a corrective phase in reaction to positive sentiment in September despite spreading optimism among investors.
That is because of uncertainty in the U.S. over the interim budget and the conflict between Democrats and Republicans over the debt ceiling. Sakuma also predicts that the upward momentum in Tokyo stocks is likely to be weak because stock prices have already factored in solid earnings at major Japanese firms, though the figures will not start being released until late October.
Sakuma said that in addition to recoveries in Japan and the U.S., economic gauges for China and Europe show that the global economy as a whole is starting to improve, which will support the market. He said stimulus measures that China is planning -- though perhaps not sustainable -- will likely support emerging markets in the current fiscal year, and that he sees the Nikkei average reaching 18,000 by the end of March 2014.
Hiromichi Tamura, chief strategist at Nomura Securities Co., predicts the Nikkei average will make big gains by the end of the year because large Japanese companies will probably upgrade their full-year earnings forecasts for the year through March 2014 when they start announcing their earnings from late October.
The strategist said stocks are likely to rise because the direction of domestic fiscal policies, including the hike in the consumption tax rate to 8% from fiscal 2014, will become clear. Despite solid earnings for the quarter ended June, many companies remained cautious about their earnings outlooks. Tamura said the Nikkei average will probably rise to 18,000 by the end of the year because corporate earnings could increase sharply if firms simply revise the exchange rates they use to forecast their earnings.
At the same time, Tamura said now that the sales tax is certain to be hiked from April, market players will probably begin worrying that personal spending will slow toward the end of fiscal 2013. He said concerns will grow that corporate earnings will struggle to rise from fiscal 2014, especially because fiscal 2013 earnings are expected to be strong. As such, the strategist says the upward momentum in stock prices will be limited, with the Nikkei average set to seesaw from January.
Tamura said expected moves by the Fed to start scaling back its bond-buying program by the end of the year will have only a limited impact on Japanese stocks because the U.S. economy is gaining strength. What he sees instead is a weakening yen amid speculation of the wider gap between Japanese and U.S. interest rates, and that this will likely push up Japanese stocks.