Nikkei hits 18-month high; weaker yen helps

By Masayuki Kitano

TOKYO (BestGrowthStock) – Japan’s Nikkei average climbed 1.6 percent to its highest close in 18 months on Friday as recent weakness in the yen buoyed exporters, and helped by investors looking to secure dividends before the financial year end.

Tokyo shares have gotten off to a solid start in the first quarter after lagging overseas indexes last year.

Expectations for improvements in corporate earnings and steady buying by overseas investors who were underweight last year have helped boost the Nikkei 4.3 percent for the year to date, compared to a 1.9 percent gain in MSCI’s index of global equities.

Foreign investors bought a net 127.7 billion yen ($1.38 billion) in Japanese shares last week, bringing their total net buying for the year to more than 1.9 trillion yen, finance ministry data shows. That compares with net buying of just 28.7 billion yen for all of 2009.

“Foreigners have been sort of regaining some of their former interest in Japan, remembering that Japan is normally a good late-cycle play for global economic recovery,” said John Vail, chief global strategist at Nikko Asset Management.

“Foreigners are rediscovering Japan and I don’t see that really ending to be honest. They are still massively underweight Japan.”

The Nikkei (.N225: ) climbed 1.6 percent to 10,996.37, its highest close since early October 2008. It also hit an 18-month intraday high of 11,001.59.

The broader Topix index rose 1.5 percent to 966.72 (.TOPX: ).

Volume rose, with some 2.2 billion shares changing hands on the Tokyo exchange’s first section, a two-week high.

Advancing shares outnumbered declining ones by nearly 8 to 1.

Technical charts show the Nikkei in a bullish trend, with the benchmark index having popped above the cloud on daily Ichimoku charts this month.

But there are some signs of overheating, with the Nikkei’s relative strength index now in over-bought territory. The Nikkei also faces resistance near 11,310, which is a 38.2 percent retracement of the Nikkei’s drop from its 2007 peak down to its 2008 trough.

RALLY BEFORE FY-END

Shares in a broad swathe of sectors climbed on Friday, including chip-linked shares such as Advantest (6857.T: ) and Tokyo Electron (8035.T: ), which extended recent gains made on the hopes of strong earnings and improving demand.

Friday’s broad rally was likely due in part to the proximity to Japan’s financial year-end at the end of the month.

“It’s hard to tell what will happen once we are in April, but it seems like there are not many people in the market looking to sell before the end of the fiscal year,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

Selling pressure related to Dai-Ichi Mutual Life Insurance’s $11 billion initial public offering seems to have peaked out, Ogawa said. “It seems that moves to secure funds to pay for Dai-Ichi Life’s IPO were mostly completed as of yesterday,” Ogawa said.

In addition, Friday is the last day, in many cases, for investors to buy Japanese stocks and still get dividends on them for the year.

Such buying by investors looking to secure dividends and short-covering in Nikkei futures added to the market’s firm tone, said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

Pioneer (6773.T: ), a maker of high-end audio equipment, surged 9.6 percent to 331 yen, making it the top percentage gainer among shares in the benchmark Nikkei 225 index.

Pioneer climbed after Daiwa Securities Capital Markets upgraded Pioneer’s rating to “1” from “3” saying the firm had resolved its balance sheet issues for now and that it was expected to post a marked earnings recovery in fiscal 2010/11.

Tokyo Electron, a manufacturer of semiconductor making equipment, climbed 2.7 percent to 6,200 yen after saying it expects to post smaller operating and net losses than it previously forecast.

Nissan Motor Co (7201.T: ) rose 1.2 percent to 777 yen, underperforming the broader market, after the Nikkei business daily reported that the carmaker and Daimler AG (DAIGn.DE: ) are in the final stages of talks to take stakes of under 5 percent in each other.

Among other gainers, Canon (7751.T: ) rose 1.9 percent to 4,265 yen and Advantest gained 3.1 percent to 2,329 yen.

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(Additional reporting by Elaine Lies; Editing by Joseph Radford)

Nikkei hits 18-month high; weaker yen helps