In the morning session of the 30th day of trade, we want to focus on the following three points.

Seeking the timing to buy on dips in the midst of unexpected developments.

DCM, 2Q operating profit increased by 18.3% to 21 billion yen.

Highlights in the morning session: Kubota, lead time halved, reaction tubes for petrochemical plants.

Seeking the timing to buy on dips in the midst of unexpected developments.

The Japanese stock market on the 30th is expected to see a tumultuous development, but it is likely to focus on finding the timing to buy after a steep decline. On the 27th, the US market saw the Dow Jones Industrial Average rise by 137 points, while the Nasdaq fell by 70 points. In August, the Personal Consumption Expenditures (PCE) Price Index, the PCE Core Price Index fell below expectations, leading to increased speculation of a significant rate cut by the Federal Reserve Board (FRB). On the other hand, the Nasdaq was weighed down by the decline of Nvidia in semiconductors. The Chicago Nikkei 225 futures settlement price was 2,400 yen lower than Osaka at 37,450 yen. The yen exchange rate is hovering around 142.60 yen per dollar.

The Nikkei Average stock price is likely to start significantly lower as it adjusts to the Chicago futures, narrowing the gap. In the LDP presidential election, where Mr. Takamichi, who is critical of the Bank of Japan's rate hikes, advanced to the final vote as the top candidate, a weakening yen is progressing in the foreign exchange market, and the Nikkei Average stock price widened its gains towards the end, closing at a high for consecutive days. The Nikkei 225 futures were bought up to 39,900 yen at one point, but with Mr. Ishiba overturning the results in the final vote, positions anticipating Mr. Takamichi's victory were suddenly unwound, leading to a sharp decline in the night session.

The Nikkei 225 futures experienced a sharp drop of over 2,400 yen in the night session, so in the morning, there is likely to be a concentration of selling related to the index, causing a wide range of stocks to start from the selling bias. While the Nikkei Average is likely to offset the rapid gains of the past two days, this could lead to a sudden supply-demand adjustment. There is a high possibility of overshooting with a downward trend, and after the selling wave subsides, it is expected that expectations for policies by the new administration will increase again, leading to a search for buying opportunities on dips.

As for stock picking, due to the selling related to the index, it is likely that scarce stocks will lead to irregular price formation, making it easier to aim for buy-on-dips rebounds. Furthermore, as the policies of the new administration become clear in the future, there is also likely to be a search for related stocks. While it may be difficult to invest in export-related industries due to currency considerations, there is also a conscious move towards rebounds in domestic demand stocks, which have been pressured by profit-taking amid the current yen depreciation.

DCM reported a 18.3% increase in operating profit to 21 billion yen for the second quarter.

DCM <3050> announced that for the second quarter of the fiscal year ending in February 2025, operating revenue increased by 16.5% year-on-year to 287.774 billion yen, and operating profit also increased by 18.3% to 21.081 billion yen. While demand for hygiene products such as masks has declined, paper-related products like toilet paper and detergents performed well due to enhanced planning for cost-saving initiatives. With an increased awareness of disaster prevention, products such as furniture anti-toppling devices, disaster prevention goods, portable batteries, and helmets have shown strong performance.

Materials of concern in the morning session

The Nikkei Average rose (39,829.56, +903.93).

The Dow Jones Industrial Average rose (42,313.00, +137.89).

The U.S. crude oil futures rose (68.18, +0.51).

Long-term US interest rates fell.

Expectations for inflation to ease in the US.

Active share buybacks

Request for improvement in corporate value by the Tokyo Stock Exchange.

Kubota <6326> lead time halved, reaction tubes for petrochemical plants

Lion <4912> Common circulation platform for actual greenhouse gas emissions from daily products with 4 companies demonstrated

Mitsui Sumitomo <8316> Mitsui Sumitomo Bank, etc., investing in emerging financial and payment sectors, building DX support infrastructure

SBI <8473> Dissolution of partnership with Taiwan PSMC, new factory in Miyagi to be maintained

UEM <9364> Kawasaki Kisen, logistics subsidiary to be incorporated as a holding company, 47% stake acquisition

Mitsubishi Heavy Industries <7011> to launch H3 main engine configuration in partnership with JAXA, scheduled for next fiscal year.

Kawasaki Heavy Industries <7012> strengthens governance of defense business with the establishment of a directly controlled organization by the president.

Panasonic Holdings <6752> starts collaboration with startups to enhance AI development efficiency, reducing learning time by 30%.

Daihen <6622> to conduct wireless charging while stationary in demonstration with Mitsubishi Fuso trucks and buses next year.

Amada <6113> accelerates production and procurement reform, increasing laser processing machines by 30%.

SMC <6273> develops auto switches for wireless power supply and communication.

Takuma <6013> acquires two Japanese thermal energy and biomass boiler manufacturing companies in the group.

OSG <6136> President Nobihiro Osawa pioneers the field of ultra-fine precision machining.

- Hamamatsu Photonics <6965>: Cell analysis device for drug discovery screening process, shortest 21 minutes.

- Mitsubishi Heavy Industries <7011>: Four CO2 recovery units, modularization for shortened construction period.

- JGC HD <1963>: Entrusted with CCS projects in Malaysia, including petroleum resource development with 8 companies.

- Rakuten Group <4755>: Providing data utilization platform for customer analysis within the Rakuten economic sphere, supporting company decision-making.

- Rohm <6963>: Terahertz wave generation and detection device with 1/1000 of the volume.

- Sumitomo Metal Mining <5713>: Mass production of 8-inch SiC substrates by the group's Saicox in Kagoshima.

☆ Schedule of events in the morning session

・08:50 August Mining Industry Production Preliminary Value (Month-on-Month Estimate: -0.5%, July: +3.1%)

・10:30 China September Manufacturing PMI (Estimate: 49.5, August: 49.1)

・10:30 China September Non-Manufacturing PMI (Estimate: 50.5, August: 50.3)