LIVE MARKETS-"Solid" earnings season in Japan - GS
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"SOLID" EARNINGS SEASON IN JAPAN - GS
Japanese stocks have notably lagged global peers at the start of 2025, with large-cap stocks struggling to react positively to upbeat earnings, but Goldman Sachs is optimistic that robust profit growth can drive stocks higher.
The Nikkei 225 .N225 is down over 4% this year, compared to a 1% gain for the S&P 500 .SPX and a near 10% rise for Europe's STOXX 600 .STOXX.
But third-quarter earnings season in Japan was "solid" according to Goldman Sachs.
"In a sharp turnaround from the notably weak 2Q results, positive surprises significantly outweighed negative surprises in 3Q," Goldman notes, as net profits rose 26% year-on-year, when excluding Softbank, compared to expectations for 7% growth.
"Robust sales growth drove profits higher against a backdrop of solid nominal GDP growth in the inflationary domestic economy, and a weaker yen," they added.
In a sign of confidence in the Japanese market, billionaire investor Warren Buffett said over the weekend his Berkshire Hathaway conglomerate BRKa.N will likely increase its ownership in the five Japanese trading houses it holds.
One notable feature, GS says, was the muted reaction by large-caps to positive surprises.
"We find that companies in the TOPIX 100 (large caps) that reported positive surprises delivered negative relative returns of -0.1% on a one-day basis, and underperformed further on a five-day basis," they said. .TOPX100
Looking forward, the U.S. bank estimates TOPIX .TOPX EPS growth of 9% this fiscal year and 11% in FY 2025.
"We believe that robust EPS growth will drive Japanese equities higher," they concluded.
(Samuel Indyk)
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