Nikkei flat as chips gain, Fast Retailing falls

TOKYO, Nov 15 (Reuters) The Nikkei was little changed on Wednesday as chip-related companies such as Tokyo Electron Ltd. benefited from expectations of growing demand, while Fast Retailing Co. Ltd. fell to profit-taking.

Shares of Myojo Foods Co. Ltd. advanced after the instant noodle maker said it was considering capital ties with industry leader Nissin Food Products to ward off a hostile takeover bid from a U.S.

investment fund.

Tokyo Electron rose 2.9 percent to 9,010 yen. The microchip equipment maker said on Tuesday net profit jumped 55 percent due to strong demand from makers of computer memory chips, ahead of Microsoft's launch of the Windows Vista operating system.

''As we saw from Tokyo Electron's earnings results ... it has a pretty bullish outlook on the (chip) industry. The company is expecting orders to increase next year,'' said Hideyuki Suzuki, investment information manager at SBI Securities.

''With the coming release of Windows Vista ... demand for (memory) chips and electronic components is likely to increase,'' Suzuki said.

The Nikkei finished the morning up 6.10 points at 16,295.65. The broader TOPIX index was up 0.02 percent at 1,596.68.

Trade volume fell from the previous session, with 757 million shares changing hands on the Tokyo market's first section. Advancing stocks slightly outnumbered decliners.

ADVANTEST, NIKON Advantest Corp., the world's largest supplier of microchip testers, gained 4.5 percent to 6,260 yen.

Nikon Corp., which manufactures chip-making equipment as well as cameras, rose 5.5 percent to 2,485 yen.

Brokerage Mizuho Securities on Tuesday raised its stance on manufacturers of equipment used to produce semiconductors to neutral from moderately bearish, citing expectations of stronger demand.

Japanese chip stocks were also helped by gains by their U.S.

peers, SBI's Suzuki said.

The Philadelphia Stock Exchange's semiconductor index climbed 2.8 percent on Tuesday, as U.S. chip heavyweights Qualcomm Inc. and Intel Corp. both posted gains of around 4 percent.

FAST RETAILING FALLS Gains were limited by shares of some firms that rely on domestic demand, such as Fast Retailing and KDDI Corp.

Fast Retailing fell 2.1 percent to 10,020 yen, and KDDI gave up 1.1 percent to 756,000 yen.

Both stocks advanced in the previous session, boosted by better-than-expected gross domestic product data. But investors worried the outlook for the world's second-largest economy is still not that strong.

Japan's tertiary index of service industry activity fell a steeper-than-expected 1.3 percent in September, government data showed on Wednesday.

''Overall, the outlook for domestic demand is not that good. So companies that rely on domestic demand are seeing some selling,'' said Toru Otsuka, deputy general manager of investment information at Mizuho Investors Securities.

GDP data on Tuesday showed that Japan's economy expanded 0.5 percent in the three months to September compared with the preceding quarter, beating market expectations of 0.2 percent growth in price-adjusted terms. But consumption fell 0.7 percent in the same period.

Myojo Foods, which is currently facing a hostile takeover bid from a U.S. investment fund, rose 2 percent to 776 yen. The company said it was considering capital ties with industry leader Nissin.

The Nihon Keizai newspaper reported earlier that Nissin would hold an extraordinary board meeting on Wednesday and announce a white-knight bid later in the day.

Nissin was down 1.7 percent at 3,420 yen.

Reuters SP DB0925