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June 15, 2018

Nikkei rises after ECB’s decision; chip-related shares tumble

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FILE PHOTO: A man looks at a mobile phone next to an electronic board showing Japan's Nikkei average outside a brokerage in Tokyo, Japan, March 23, 2018. REUTERS/Toru Hanai

By Ayai Tomisawa

TOKYO (Reuters) – Japan’s Nikkei share average rose on Friday morning after the European Central Bank announced it would avoid raising rates until mid-2019, but chip-related stocks tumbled after a brokerage slashed the target price of Tokyo Electron.

The market was on mid-day break when the outcome of a Bank of Japan meeting was announced. As widely expected, the BOJ kept its short-term interest rate target at minus 0.1 percent and a pledge to guide 10-year government bond yields around zero percent.

The Nikkei (N225) gained 0.4 percent to 22,827.77 at the break.

The ECB announced it would end its bond-purchase program at year-end but signaled that any interest rate hike was still distant.

“Investors were relieved that there is no imminent tightening in Europe, the day after they were spooked by the U.S. Federal Reserve’s hawkish stance,” said Nobuhiko Kuramochi, a strategist at Mizuho Securities.

For the week, the benchmark index has risen 0.6 percent so far.

Drugmakers were steady, with Astellas Pharma (T:4503) rising 1.3 percent and Eisai Co (T:4523) soaring 2.5 percent.

Mining stocks were also bought, with Inpex Corp (T:1605) gaining 0.9 percent and Japan Petroleum Exploration (T:1662) adding 1.4 percent.

Semiconductor manufacturing equipment maker Tokyo Electron Ltd (T:8035) stumbled as much as 5.1 percent to 19,025 yen, the lowest point in four months, after Credit Suisse (SIX:CSGN) cut its target price to 17,600 yen from 19,700 yen.

The brokerage firm said it expects memory makers to scale back their capex plans, which will likely cause Tokyo Electron’s operating profit to miss its guidance in the year ending March 2019.

The downgrade dented sentiment among other chip-related companies, with Advantest Corp (T:6857) shedding 3.6 percent and Shin-Etsu Chemical (T:4063) declining 2.4 percent.

Credit Suisse hiked the rating of Murata Manufacturing (T:6981) to ‘outperform’ from ‘neutral’, saying that major Japanese MLCC (Multilayer Ceramic Capacitor) makers are pushing for price increases across all products of 20–30 percent for all clients. Murata soared 6.2 percent.

Taiyo Yuden (T:6976) jumped 9.7 percent after the brokerage raised its target price to 4,000 yen from 2,130 yen, citing the same factor.

The broader Topix (TOPX) rose 0.3 percent to 1,788.49.

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