Nikkei up, slow trade puts small caps in focus

TOKYO, Aug 4 (Reuters) The Nikkei average edged up 0.27 percent in thin trade on Friday as shares of Konica Minolta Holdings Inc. and other firms seen as solid earners advanced.

Slow trade on the Tokyo exchange's first section helped send investors toward small-cap markets. The Mothers index rose for the seventh straight session, as shares of smaller companies benefited from the view that their stock prices are undervalued after steep falls this year.

Earnings were the main focus on the large-cap first section of the Tokyo exchange, said Yoku Ihara, a manager in the investment information department at Retela Crea Securities.

''Overall earnings have not been bad at all,'' Ihara said.

Investors will be awaiting quarterly earnings results from several major Japanese companies later in the day. Toyota Motor Corp. and top shipper Nippon Yusen KK are among those due to report.

However, with trade slow on the first section in the morning, many investors were turning to shares of smaller firms, he said.

''At the moment, the small-cap markets are a little bit more lively. The trade volume is a little bit more active there ... I think individual investors have been heading to small-caps as the first section is little changed overall.'' The Nikkei was up just 41.61 points at 15,511.98 as of 0124 GMT.

The broader TOPIX index was up 0.16 percent at 1,571.98.

The Mothers index for start-up stocks was up 0.18 percent at 1,284.19 after earlier rising as high as 1,298.37. If it finishes in positive territory, it would be the average's seventh straight gain.

It has declined about 50 percent so far this year.

Konica Minolta gained 2.1 percent to 1,496 yen after the office-equipment maker posted a 22 percent increase in first-quarter operating profit and revised up its interim earnings forecast.

Nippon Paper Group Inc., Japan's second-biggest paper maker, fell 1.8 percent to 448,000 yen after it bought a stake in smaller rival to block a hostile bid by industry leader Oji Paper Co.

Oji Paper was flat at 680 yen. Oji's target company, Hokuetsu Paper Mills Ltd., rose 1.6 percent to 843 yen as the takeover battle for the paper maker continues.

REUTERS VJ PM0731