Japan Equity Strategy: Apr-Jun earnings outlook: Mini rotation from AI-driven market, earnings increase in importance

研报英文原文证据摘录

Japan Equity Strategy: Apr-Jun earnings outlook: Mini rotation from AI-driven market, earnings increase in importance

sportation and

logistics, materials and chemicals, and construction; Figure 6BusinesconditionsDIandchangebymajorsector); (2) the food sector

on prospective progress in passing costs through to prices; and (3) the autos,

defense, and banks sectors on expectations for upward revisions of earnings

guidance at 1H results in autumn.

• Apr-Jun results could serve as share price catalyst: We expect earnings to

have a larger impact on share prices during the Apr–Jun earnings season than

in Jan–Mar. The market since late June has seen a mini rotation away from the

market driven mainly by AI semiconductors in Apr–Jun (see our July 13

report), and share price gains the past three weeks have extended to lagging

sectors with positive earnings, including banks, pharmaceuticals,

transportation, and insurance. Japan has many sectors with growing gaps

between strong earnings and share prices (e.g., capital goods, energy, and

consumer goods; see our June 13 report, Figure 3EPSrevisionindexandsharepriceperformancebysector(4W), Figure 4DecompositionofTOPIX17-SectorMovements(4W)). Long-term growth

expectations for AI semiconductors are unchanged, but with increased

volatility for AI semiconductor stocks, we look for an increase in investment

in these non-AI sectors and stocks.

• Tankan suggests firm sales but margin declines in some sectors: The BoJ’s

Tankan survey for June showed that business conditions at large manufacturers

improved to the highest level in eight years, supported by a decline in crude oil

prices and firm global demand for AI semiconductors. The non-manufacturing

DI also remained at a high level, as corporate sentiment was generally good