Nikkei bounces after sharp fall, investors still wary as earnings eyed


* Nikkei rises 1 pct, Topix up 0.8 pct

* Gains follows sharp fall on Fri, investors remain cautious

* Earning results so far have been disappointing

* JFE falls after no upward revision to earning

* Mitsubishi Motors up on dividend hopes after capital

raising news

By Tomo Uetake

TOKYO, Oct 28 (Reuters) - The Nikkei stock average bounced

back on Monday, recouping some of its steep losses suffered at

the end of last week, but investors remain cautious ahead of a

big earnings week for Corporate Japan and concerns over tight

credit conditions in China.

The benchmark Nikkei gained 1 percent to 14,225.98,

recovering after its 2.8 percent fall to a 2-1/2 week low of

14,088.19 on Friday.

The yen softened against the dollar, providing some relief

to exporters. It was last quoted at 97.48 yen.

The U.S. S&P 500 ending at another record high on

Friday also helped underpin Tokyo stocks. The Nikkei shed 4.3

percent in the last three sessions, hit mainly by concerns about

tight credit conditions in China, a major export market for


"The market is getting bought back after excessive selling

on Friday... I don't think we will be testing new highs," said

Kenichi Hirano, strategist at Tachibana Securities.

"This will end when all the short-covering is over. The

Nikkei won't make it above 14,500."

Investors remain reluctant to chase the market aggressively

as they await a further batch of earnings this week, with

results so far failing to impress.

JFE Holdings Inc slid as much as 4 percent after

Japan's No.2 steelmaker on Friday left its full-year profit

forecast unchanged, which was 25 percent below analysts'

expectations, citing slack overseas markets and extra spending

to upgrade facilities.

"Expectations of upward earning revisions were one big

driver for Japanese shares but the earning season got off to a

bad start," said Tachibana's Hirano.

Still, Hirano said there are hopes for more positive

earnings announcements in the days ahead.

Companies such as KDDI Corp, Komatsu Ltd

and Hitachi Construction Machinery Co Ltd are due to

report their results after the market shuts on Monday.

KDDI climbed 3.8 percent after the Nikkei newspaper said the

mobile carrier will likely report a record first-half operating

profit of about 340 billion yen ($3.5 billion) for the

April-September period, up 50 percent on the year.

Mitsubishi Motors Corp jumped as much as 4.9

percent on the news that the carmaker plans to raise around $2

billion in a public share offering as early as January to pay

back top shareholders for a 2004 bailout that enabled its

decade-long turnaround. [ID: nL3N0IG025]

Hopes that the capital raising will also allow Mitsubishi to

pay dividends for the first time in nearly 15 years eclipsed

concerns over dilution.

Analysts at Nomura said the Japanese market is likely to be

supported on its attractive valuations.

"A particularly important point is that Japanese stocks are

again trading at a P/E discount versus U.S. stocks," they wrote

in a report to clients on Friday, noting that the P/E ratio for

the TOPIX is 14.3, compared to 15.1 for the S&P 500.

The broader Topix added 0.8 percent to 1,187.62 in

relatively light trade, with volume at 27.9 percent of its full

daily average for the past 90 trading days.

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