Japanese stocks ended higher on Tuesday for a third straight day as growing confidence over the domestic economic recovery encouraged investors to chase blue-chip stocks such as Toyota Motor Corp. <7203.T>. Marine transport and raw material makers also lured buying as they were considered undervalued given solid prospects for their earnings, analysts said. But the market's overall gains were limited as selling hit major technology stocks including Advantest Corp <6857.T> due to growing uncertainty over the sector's business outlook. Caution ahead of quarterly earnings results by U.S. chip giant Intel Corp. due later on Tuesday also made buyers nervous about placing large orders. The Nikkei average <.N225> pared initial losses and closed up 0.23 percent at 11,608.62, adding to a two-day 2.3 percent gain. The broader TOPIX index <.TOPX> added 0.41 percent to 1,166.47. Analysts said more investors started shifting their buying target from technology stocks to blue chips and domestic business-oriented stocks with attractive valuations given uncertainty over the tech sector's business outlook.
"It's incredible that Toyota and Honda's PER (price to earnings ratio) are still below 18 despite their solid earnings prospects," said Yoshihiko Kosuga, an equities manager at Mizuho Investors Securities. "Investors are thinking it might be wiser to scoop up these blue chips with attractive valuations rather than chasing tech stocks whose earnings outlook is still unclear." Toyota, Japan's biggest auto maker, climbed 3 percent to 4,470 yen. The automaker's PER now stands at 13.45, compared with the Nikkei average's expected PER of 17.39 for the financial year to next March. UBS also lifted its earnings estimates and price target for Toyota, saying U.S. sales volumes were higher than expected, incentives lower and the yen surprisingly weak. Some other auto makers also rose after Morgan Stanley upgraded its view on Japan's auto industry to "attractive" from "in-line", citing stronger-than-expected gains in market share for Japanese auto makers in the U.S. market in January-March. Among such auto makers, Honda Motor Co Ltd. <7267.T>, whose PER now stands at 12.74, gained 2.2 percent to 5,100 yen. But Advantest, Japan's top maker of chip-testing devices, fell 0.88 percent to 6,720 yen and Tokyo Electron Ltd <8035.T>, the world's second-biggest producer of chip-making equipment, fell 1.4 percent to 5,620 yen. Other major tech and computer-related stocks also took a beating as concerns mounted over the outlook for corporate earnings. Meanwhile, the market showed little reaction to the Bank of Japan's widely expected decision at a board meeting to keep its ultra-easy monetary policy unchanged. Trade was moderately active with 1.084 billion shares changing hands on the first section, up from 960 million shares on Monday. Losers outnumbered gainers 740 to 681.////