By Chris Shaw<\/p>\n
Just like "sell in May and go away" is a common saying for the Australian market given its tendency to perform poorly towards the end of the financial year, the Japanese market has a similar trend towards significant movements in the key Nikkei Index during August.<\/p>\n
This reflects the reporting of first quarter profit results from listed companies (the Japanese financial year runs from April 1 to March 31), with upgrades usually a precursor of strong gains in the index in August and downgrades resulting in significant weakness.<\/p>\n
For examples of how much the market reacts, when results fell short of expectations in August of 2001 and 2002 the index fell 24% and 19% respectively, but last year much of the index’s 40% gain for the year flowed through from the stronger than expected earnings results in August.<\/p>\n
The index has risen about 7% since mid-July, which followed significant weakness as in the space of a couple of months the market declined from levels of around 17,000 to below 14,500.<\/p>\n
A report by UBS suggests further gains are possible, as earnings generally are coming in above market forecasts and a number of companies are lifting their profit guidance. The broker notes in July almost two-thirds of earnings revisions were upgrades to guidance, led by major companies such as Canon and Komatsu, a manufacturer of earthmoving equipment.<\/p>\n
On the broker’s estimates of the 92 companies within the first sector of the market to advise of changes to guidance (which requires a change to expected earnings of at least 30% from previous expectations), 59 of the companies lifted their estimates. The broker now estimates companies generally should record profit growth of at least 10%, up from less than 4% in June.<\/p>\n
The upgrades are coming at just in time in terms of the Japanese market’s overall performance this year, as for the year to date the Nikkei has fallen 3.8% compared to a 3.2% gain in the MSCI Asia-Pacific Index.<\/p>\n","protected":false},"excerpt":{"rendered":"
Earnings results and guidance from Japanese companies has been above expectations for first quarter earnings, which historically has been a key driver of full year performance for the index.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[58],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/52127"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=52127"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/52127\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=52127"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=52127"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=52127"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}