Nikkei falls 3 pct in 2010, pressured by yen’s rise

* Yen’s rise to 7-week high weighs on Nikkei on Thursday

* Nikkei falls 3 pct in 2010 after 19 pct gain previous year

* Long-term trend stays strong, Japan shares seen undervalued

By Chikafumi Hodo

TOKYO, Dec 30 (BestGrowthStock) – Japan’s Nikkei average ended the
year on a sour note on Thursday, pressured by profit-taking as
the yen advanced to a fresh seven-week high against the dollar.

The benchmark Nikkei (.N225: ) booked a 3 percent loss for 2010
as the yen’s strength over the course of the year stoked worries
about the outlook for Japan’s export-led economy. In 2009, the
Nikkei had gained 19 percent led by a rally in high-tech
exporters.

Still, Japanese shares have rebounded from the year’s lows on
buying led by foreign investors, with their recovery having
gathered momentum since November following monetary easing by the
Federal Reserve and the Bank of Japan.

Overseas investors have been major buyers during this
recovery on the view that Japanese shares were undervalued
compared with those in other developed markets, analysts said.

“Today’s move very much symbolises the trend of the year as
the fluctuation of the yen basically drove Japanese stocks,” said
Masaru Hamasaki, a senior strategist at Toyota Asset Management.

On the final trading day of the year on Thursday, the Nikkei
lost 1.1 percent or 115.62 points to 10,228.92.

However, the Nikkei gained about 9.2 percent in the last
quarter of 2010, after having slumped to the year’s intraday low
of 8,796.45 on Sept. 1.

The broader Topix (.TOPX: ) slipped 1 percent on Thursday to
898.80.

Although the Nikkei fell 3 percent on the year, when
accounting for changes in currency rates it gained 10.7 percent,
according to Thomson Reuters data. That is roughly in line with
the performance of the Dow Jones industrial average (.DJI: ).

“It’s fair enough to say that Japanese stocks were mainly hit
by the yen’s strength and if you leave out the forex factor, the
Nikkei actually performed pretty similarly to the Dow,” Toyota
Asset’s Hamasaki said.

Japanese financial markets will be closed from Friday for the
year-end break and reopen next Tuesday.

LONG-TERM TREND STAYS STRONG

The long-term outlook stayed bullish, however, as investors
remain eager to buy Japanese stocks which they see as undervalued
compared with those in other major markets.

“The long-term bullish trend in Japanese stocks is still in
place, but we have to remember that this scenario is only alive
as long as the yen won’t rise too rapidly,” said Koichi Ogawa,
chief portfolio manager at Daiwa SB Investments.

The dollar was down 0.2 percent at 81.50 yen (JPY=EBS: ) in
late Asian trade. It fell as low as a fresh seven-week low of
81.28 yen earlier.

“The recent advance of the yen has been a bit unexpected and
clearly having a negative psychological impact on share prices,”
said Takashi Ohba, a senior strategist at Okasan Securities.

Daily volume picked up from the previous day, with 1.47
billion shares changing hands on the Tokyo Stock Exchange’s first
section, from 1.31 billion shares on Wednesday. It was below
last week’s daily average turnover of 1.63 billion shares.

Shares of exporters fell, reflecting the stronger yen. Sony
Corp (6758.T: ) dropped 1 percent to 2,927 yen and Panasonic
(6752.T: ) also lost 1 percent, to 1,153 yen.

Mizuho Financial Group (8411.T: ) dropped 2.6 percent to 153
yen after Japan’s second-largest bank said it would buy preferred
shares in consumer credit firm Orient Corp (8585.T: ) from Morgan
Stanley (MS.N: ) and Kohlberg Kravis Roberts (KKR.N: ) for 30 billion
yen ($368 million). [ID:nTOE6BT024]

Orient rose 9.2 percent to 95 yen.

Hitachi (6501.T: ) rose 1.9 percent to 433 yen following a
series of reports about the country’s biggest electronics
conglomerate.

Mitsubishi Heavy Industries Ltd (7011.T: ) and Hitachi will
jointly bid for a 350 billion yen ($4.3 billion) rail project in
Bangkok, pushing the two Japanese conglomerates closer to merging
their overseas rail businesses, the Yomiuri newspaper reported on
Thursday. [ID:nTOE6BS07Z]

Mitsubishi Heavy fell 1.3 percent to 305 yen.

On Wednesday, the Sankei newspaper reported the company is
likely to clinch a contract for a UK rail network project as
early as the start of next year.

Agility Trains, a consortium consisting of Hitachi and
British infrastructure project manager John Laing, have been the
preferred bidders on the contract. [ID:nLDE6AO0BQ]
(Reporting by Chikafumi Hodo; Editing by Chris Gallagher)

Nikkei falls 3 pct in 2010, pressured by yen’s rise