Seiji Katsurahata (桂畑誠治) said that, while investors may remain on the sidelines in October, an upward bias could re-emerge as the market looks ahead after the US-China summit.
Tokyo stocks opened the week with buying in the lead, but soon came under pressure from profit-taking and closed at the day's low. The market had risen for 5 consecutive trading days through the previous week, and this appeared to be a reaction to that advance. The US-China summit must be viewed in light of the possibility of further talks, but no clear direction has emerged at this stage, making it difficult for the market to digest the developments.
Seiji Katsurahata (桂畑誠治) said that October trading is generally expected to be characterized by a wait-and-see mood and limited upside. At the same time, he said that the Tokyo market could see periods of stronger upside momentum depending on the performance of US stocks following a possible downward revision to the US August PCE deflator, the September ISM Manufacturing Index and the September employment report.
The Nikkei's October range was described as having an upside target of ¥69,600 and a downside target of ¥62,700, although a deep decline to around ¥60,400 was also considered possible if risk aversion intensified. Semiconductors were seen as candidates for buying on dips, while bank stocks were considered attractive investments over the medium term against a backdrop of expectations for higher interest rates.
Construction stocks related to infrastructure were also identified as an area to watch with a medium-term investment stance, supported by favorable government policy. It was emphasized that the outcome of the US midterm elections and interest-rate trends could affect the market's direction from next week onward.