Japanese Stocks Have Best Year Since 2013 on Corporate Profits

(Bloomberg) -- Japan's Topix index capped its best annual performance since 2013, though it ended the last trading day of the year lower as some investors adjusted their positions in thin trading before the New Year holidays.

Electronics makers were the heaviest drag on the benchmark Friday as the yen gained against the dollar for a second day. A gauge of bank shares rebounded from the steepest drop in two weeks after U.S. 10-year Treasury yields rose overnight. Trading volume for shares in the Topix was about 43 percent below the 30-day average. The Topix gained 20 percent in 2017 and the Nikkei 225 Stock Average increased 19 percent this year, the most since 2013, as global growth helped improve corporate earnings.

“There were few buyers and some investors sold to adjust their positions before the New Year holidays,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo. “The Japanese stock market had a very good, stable year in 2017. It will probably have another good year in 2018 as Japanese corporate earnings look firm with improving sales on solid global growth and demand.”

0il and coal stocks were the best performing industry group in 2017 with a 52 percent advance, as crude prices have risen 12 percent. A gauge of power utilities was the only one of 33 Topix groups to decline from a year earlier.

Nomura Holdings Inc. raised its forecasts for Japanese corporate earnings and share prices because of an improved outlook for the global economy, analysts led by Hisao Matsuura wrote in a report Thursday. They increased the top end of the trading range projection for the Topix to 2,080 from 2,000 and to 27,000 from 25,500 for the Nikkei in 2018.

“Japanese stocks will likely maintain an upward momentum through the next year,” said Shunichi Otsuka, general manager in the research department at Ichiyoshi Securities Co. in Tokyo. “With global growth picking up and Japan's economy recovering, Japanese companies will probably maintain almost double-digit profit growth in the next fiscal year. There are no major clouds on the horizon for Japan's economy and corporate earnings.”

Japanese markets will reopen January 4 after the New Year holidays.

Summary

• Topix -0.1% to close at 1,817.56 in Tokyo
• Nikkei 225 -0.1% to close at 22,764.94
• Yen +0.1% at 112.72 per dollar; strengthened 0.4% on Thursday
• Electronics makers: Keyence -1.3%, Nidec -0.9%, Canon -0.6%
• Banks: MUFG +1.2%, Sumitomo Mitsui Financial +0.6%, Sumitomo Mitsui Trust +0.7%
• Adastria -8.4%, biggest decline in a year; posted 3Q operating profit of 2.9b yen, down 49% y/y

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net.

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Jonathan Annells, Kurt Schussler

©2017 Bloomberg L.P.