In the morning session on the 31st, we want to focus on the following three points.

■ Focus on the reaction to Advantest's earnings.

Tokyo Electric Power Co., Inc., 2Q operating profit decreased by 43.9% to 199 billion yen.

■ Morning session focus: Idemitsu Kosan, President Shunichi Kito aims for domestically produced hydrogen, initially imported.

■ Focus on the reaction to Advantest's earnings.

In the Japanese stock market on the 31st, although there is a tendency for selling to lead the way, stability is expected. On the 30th, the US market saw the NY Dow drop by 91 points and the Nasdaq drop by 104 points. In addition to private sector employment statistics exceeding expectations and domestic gross domestic product (GDP) for July-September showing continued strong growth despite slowing from the previous quarter, there were scenes of buying in anticipation of a soft landing. However, Advanced Micro Devices (AMD) fell below expectations, leading to selling in other semiconductor stocks, and caution towards AI-related stocks increased due to the sharp drop in Super Micro Computer stocks. The Chicago Nikkei 225 futures settlement price closed at 39,295 yen, down 195 yen from Osaka. The yen is trading around 153.20 yen per dollar.

The Nikkei Average stock price is likely to start with a dominant selling trend as it aligns with Chicago futures. The decline in AMD is likely already factored in from the previous day's after-hours trading. However, with the SOX index dropping by over 3%, stocks with significant index impact like Toshiba Electronic <8035> are more prone to profit-taking selling. Furthermore, with Super Micro dropping by over 30%, profit-taking selling in AI-related stocks is also likely. With the Nikkei Average stock price rising by over 1360 yen in 3 days, there is also awareness of selling waiting for a rebound.

Meanwhile, as earnings reports become more prominent, attention is likely to be on the reaction to Advantest's <6857> earnings in Japan. The earnings for the second quarter of the fiscal year ending March 2025, announced last evening, showed record high revenues and operating profits for the interim period. Demand for advanced process product testing equipment has increased, leading to a significant increase in sales of SoC semiconductor testing equipment. They have also announced an upward revision of earnings forecast for the fiscal year ending March 2025. Should Advantest show a strong movement in a weak US tech stock environment, it may become more difficult for the sellers to initiate.

As the US presidential election approaches and earnings reports become more prominent, active buying is likely being held back, but buying on dips is probable. The Nikkei Average stock price rose with a gap up yesterday and temporarily recovered past the 39,400 yen mark. Having touched the Bollinger Band's +1σ (39,397 yen), it is a level where profit-taking is likely. If stability around 39,000 yen is observed, there is a possibility that buying on dips will strengthen.

In addition, in the earnings reports announced last night, companies such as Advantest, Genki GDC <9828>, A.G.P. <9377>, DryChem <1909>, Kagome <2811>, Makita <6586>, LIXIL <5938>, Wellnet <2428>, Net One <7518>, Hokuriku Electric Power <9505>, Astellas Pharma <4503>, FDK <6955>, and others are attracting attention.

Tokyo Electric Power Co., Inc., 2Q operating profit decreased by 43.9% to 199 billion yen.

Tokyo Electric Power Co., Inc. <9501> announced its performance for the second quarter of the fiscal year ending March 2025, with revenue decreasing by 4.5% to 3.354 trillion yen compared to the same period last year, and operating profit decreasing by 43.9% to 199.012 billion yen. This result falls below the consensus of around 218 billion yen. The decrease in the "psychological profit from discrepancies" that increased due to falling resource prices, along with the heavy burden of compensation costs related to the Fukushima Daiichi Nuclear Power Plant accident, contributed to this. Additionally, the performance forecast for the full year ending March 2025 is pending as the restart date of the Kashiwazaki-Kariwa Nuclear Power Plant is uncertain.

Materials of concern in the morning session

Nikkei average is up (39277.39, +373.71).

1 Dollar = 153.20-30 Yen.

U.S. crude oil futures are up (68.61, +1.40).

USAInflationExpecting a calming period.

Active share buybacks

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

Chairman and CEO Toshiichi Kito of Idemitsu Kosan Co., Ltd. aims to import domestic hydrogen in the near future.

Sumitomo Chemical Co., Ltd. returns to a growth trajectory, achieving results through petrochemical-related activities and structural reforms.

Mitsubishi Electric Corp. unsponsored ADR to expand its manufacturing capacity, investing 16 billion yen in Japan and the U.S. for power distribution and delivery.

Suzuki Motor Corporation deepens its collaboration with Toyota, supplying SUV-type EV as an OEM.

Kyocera Corporation sponsored ADR sells a portion of its KDDI shares, raising 500 billion yen.

Nankai Electric Railway <9044> plans to spin off its railway division in April 2026, focusing on real estate for growth.

Alps Alpine <6770> to end car component production in Ireland by the end of the 2027 fiscal year.

Suzuki <7269> to consolidate its four-wheeler subsidiary in India.

Rohm <6963> begins mass production of digital-analog conversion circuit chips for audio, focusing on sound quality differentiation.

Takeda iPHD <7875> President, Yuki Togi, on the offensive in semiconductors and overseas operations.

NEC <6701> partners with Maruki Sangyo for AI-driven plastic waste blending and color matching, reducing work time by half even for beginners.

TIS <3626> launches SaaS offering, automatically generating reports on negotiation outcomes.

Daio Paper <3880> transports goods with self-driving trucks, conducting highway demonstrations.

Karitto <4275> has started the 3rd phase of construction in Gunma, increasing production of ammonium perchlorate.

Obayashi Corporation <1802> obtains WELL certification for office building in Thailand.

KH Neochem <4189> applies 'glycans' to pharmaceuticals, actively disseminating research information.

Taisei Corporation <1801>, along with Chalenergy and two other companies, to demonstrate wind power generation in super tall buildings from April next year.

Mitsubishi Materials Corporation <5711> accelerates proposal of recycled metals, launching the first brand.

Toyobo <3101> establishes a resource circulation scheme, recycling films for manufacturing.

Asahi Kasei <3407> establishes a new independent company to advance drug delivery systems for establishing cancer treatment methods.

☆ Schedule of events in the morning session

• 08:50 September mining and industrial production (MoM forecast: +0.8%, August: -3.3%)

• 09:30 Australian retail sales in September (MoM forecast: +0.3%, August: +0.7%)

• 10:30 Chinese manufacturing PMI for October (expectation: 49.9, September: 49.8)

• 10:30 Chinese non-manufacturing PMI for October (expectation: 50.3, September: 50.0)