Nikkei climbs after 16-month low

By Aiko Hayashi and Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei average rose 1.2 percent after hitting a 16-month low on Wednesday, drawing support from a halt in the rapid advance in the yen on a manufacturing rebound in China and stronger-than-expected growth in Australia.

Market players said other help came from a slight spike in dollar/yen after news that Japanese political powerbroker Ichiro Ozawa, challenging Prime Minister Naoto Kan in a party leadership vote, said in a policy statement he would implement steps including currency intervention if the yen rose rapidly.

“Investors welcomed growing signs of a halt in the advance in the yen against the dollar, stemming from yen crosses after Australian growth data showed improvement and China’s data came in strong,” said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

“Ozawa’s comment on intervention is probably an additional positive factor, but the main catalysts for stock gains are signs of a halt in the yen’s rapid advance and the solid performance in other Asian stocks.”

The benchmark Nikkei (.N225: ) ended up 102.96 points at 8,927.02, after earlier falling as low as 8,796.45, its lowest since April 2009, helped by what some market players said was buying by domestic institutional investors at lows.

The broader Topix (.TOPX: ) added 0.8 percent to 811.40.

China’s official purchasing managers’ index rose to 51.7 in August from a 17-month low of 51.2 in July, while Australia’s economy grew a stronger-than-expected 1.2 percent in the second quarter.

The Australian dollar rose 1.3 percent to 76.01 yen and the greenback edged up 0.3 percent to 84.47 yen.

Ozawa said in a statement that he would use 2 trillion yen ($23.76 billion) of reserve funds in the budget for the current fiscal year to next March for economic steps.

But market players said some investors were likely to stay on the sidelines with the battle between Kan and Ozawa for leadership of the ruling party, and hence the premiership, opening on Wednesday. The party will hold its leadership vote on September 14.

Shortly after the opening the benchmark fell below 8,800 for the first time in 16 months, with market players saying sentiment remained fragile with investors worried about possible negative surprises from a slew of U.S. indicators due out this week, including jobs data.

ADP private employers data is due out later on Wednesday, with non-farm payrolls on Friday.

“A decline from the previous month is forecast for the ADP data, although it is still likely to be positive, and this may well be factored in, but the market is nervous that the figures could perhaps even turn negative,” said Hideyuki Ishiguro, a strategist at Okasan Securities.

“This sort of negative surprise could lead to more dollar selling, and this has investors worried.”

The next technical level for the Nikkei if it resums falling is 8,697, a 61.8 percent retracement of the rally from its March 2009 low to its April 2010 high.

HITACHI UP, CHINA-LINKED STOCKS HIGHER

Shares of Hitachi Ltd (6501.T: ) climbed 2.4 percent to 348 yen after sources familiar with the matter said the company is planning an initial public offering of its hard-drive unit in the United States, possibly by the year-end.

Sources said bankers are in discussion with the Japanese company about an IPO and underwriters could be named in early September. The hard-drive unit, Hitachi Global Storage Technologies (HGST), is the world’s No.3 hard drive maker and analysts said it could be valued at about $3 billion.

Shares of companies with strong businesses in China gained, with Hitachi Construction (6305.T: ) up 1.9 percent at 1,700 yen and Komatsu (6301.T: ) rising 1.2 percent to 1,726 yen.

Tech shares that were sold sharply on Tuesday, such as Canon Inc (7751.T: ), crawled higher, but some blue-chip shares hit multimonth lows on persistent worries about the strong yen’s impact on their earnings.

Toyota Motor Corp (7203.T: ) ended down 0.1 percent at 2,857 yen after falling as low as 2,806 yen, its lowest in about 17 months.

Toshiba Corp (6502.T: ) was down 2 percent at 387 yen after hitting its lowest in 13 months and Sharp Corp (6753.T: ) was down 0.9 percent at 797 yen after touching its lowest in 17 months.

Some 1.6 billion shares changed hands on the Tokyo exchange’s first section, its highest volume this week, albeit light.

Advancing shares outnumbered declining ones 862 to 649.

(Editing by Michael Watson)

Nikkei climbs after 16-month low