International | Apr 20 2006
With the ever-improving outlook for the Japanese economy continuing to dominate headlines, the 40% gain in the Nikkei index from its low point last year has received little attention as the focus is on the end of deflation and the interest rate outlook.
Higher oil prices have taken some of the steam out of the index in recent sessions, but in the view of NikkeiCitigroup the technical outlook remains favourable in the short-term.
The broker suggests the index should hit a new high sometime next month, its target a figure between 18,000-18,500 points. This compares to a current level of the index of around 17,350.
Supporting the target is the positive outlook for corporate earnings, as some dealers have suggested earnings may come in above current forecasts. The positive revisions from such an outcome would be supportive for the broader index, particularly as technology and banking stocks in particular look set to post solid earnings.
Revisions to earnings guidance are already flowing through, with computer company Elpida Memory recently upgrading its earnings outlook ahead of its upcoming profit result. At the same time the outlook for the banking sector is also strong, given companies are increasing their levels of investment and the property market is slowly showing improvement.
