Nikkei hits 3-month closing high; resistance looms

* Short-covering buoys, retail investors cautious – analyst

* Weaker yen versus dollar, strong U.S. data support Nikkei

* Break above 9,800 would open way towards 10,000 – analysts

* But profit-taking interest strong below 9,800

By Aiko Hayashi and Chikafumi Hodo

TOKYO, Nov 8 (BestGrowthStock) – Japan’s Nikkei average rose 1.1
percent to a three-month closing high on Monday, adding to gains
made last week as risk money shifts towards global equities on
improving prospects for the U.S. economy.

The outlook for the U.S. economy has brightened after the
Federal Reserve decided to buy more debt and after encouraging
U.S. jobs data, helping push the Nikkei (.N225: ), an index which
has lagged other stock markets, above 9,700.

But investors were careful about chasing the benchmark too
aggressively as they expect profit-taking and technical selling
after a jump of more than 6 percent since the start of last week,
its best weekly performance in a year.

“A liquidity bubble is emerging in global markets, and
investors increasingly believe Japanese stocks, which have lagged
behind, will also reverse course,” said Kenichi Hirano, operating
officer at Tachibana Securities. Hirano said the main impetus
behind the Nikkei’s gains remained short-covering by foreign
investors.

“Individual investors likely have begun to pay attention to
signs of the change, but they haven’t jumped back into the stock
market yet as they can’t really grow bullish overnight after
having been pressured to sell up until now,” he said.

The Nikkei average ended the day up 106.93 points at
9,732.92, its highest close since July 28.

Upward momentum picked up after the Nikkei broke through a
high of 9,716.92 reached on Oct. 7, lifting it to an intraday
peak of 9,737.01.

The broader Topix (.TOPX: ) gained 0.8 percent to 841.74.

The Nikkei’s technical trend brightened after it broke
through its 25-day moving average of 9,430 as well as its 26-week
moving average of around 9,530 last week, which some analysts now
see as support.

Its next target would be an intraday high of around 9,750
reached in early August and further resistance is seen at its
July peak of around 9,800.

“We are seeing some resistance, but sentiment towards the
Nikkei is strong. After the current level of 9,700-9,800 is
broken, the market will test the Nikkei towards 10,000,” said
Hideyuki Ishiguro, a supervisor in the investment strategy
section at Okasan Securities.

Market players have said last week’s rally was largely due to
short-covering of futures by foreign investors and advances for
resource shares as hopes for more liquidity spurred investor risk
appetite.

But Tokyo still lags other stock markets, particularly due to
worries about the impact of the strong yen on corporate earnings
and a fragile economic recovery.

Market players also cite ineffective measures against
deflation, a lack of political leadership and lacklustre growth
prospects as being behind the Japanese market’s underperformance.

In contrast to the Nikkei’s three-month high, U.S. stocks (Read more about the stock market today. )
have surged back to levels last seen before Lehman Brothers’
collapse in 2008.

“We are watching whether there are more strong economic
indicators from the United States. More strong signs would push
up the dollar and encourage inflows into Japanese export-related
shares,” Ishiguro said.

A weaker yen has also helped the market. In Monday Asian
trade, the yen was little changed from Friday at 81.23 (JPY=: )
against the dollar but it was more than a yen lower than the
15-year high of 80.21 yen reached last week.

Last month, foreign investors were net buyers of Japanese
stocks to the tune of about 463 billion yen ($5.7 billion), while
retail investors sold a net 244 billion yen worth, Tokyo Stock
Exchange data shows.

Still, analysts say that although Japanese stocks have
benefited from a recent surge in global equities, their standing
in the world remain relatively weak.

Fund trackers EPFR Global say that nearly $70 billion net has
flowed into the emerging market stock funds they monitor over
this year, close to half of it since August. [ID:nLDE6A00QV]

For a graphic showing money flow into emerging markets,
please see: http://r.reuters.com/hep83q

RESOURCE STOCKS UP

Resource-linked stocks rose on higher commodity prices as
investors took a surprisingly robust U.S. jobs report as a hint
that the economy was in better shape than previously thought.

U.S. non-farm payrolls figures released on Friday showed a
solid rise of 151,000 for October, the first gain since May and
more than double economists’ expectations. [ID:nN04265378]

Gold hit a record peak on Friday and industrial metals and
oil pushed higher. [COM/WRAP]

Sumitomo Metal Mining Co (5713.T: ) climbed 2.3 percent to
1,410 yen and Mitsui Mining and Smelting (5706.T: ) gained 2.7
percent to 263 yen. Trading firm Mitsui & Co (8031.T: ) rose 2.5
percent to 1,352 yen.

Shares of Credit Saison (8253.T: ) jumped 5.5 percent to 1,238
yen after the consumer credit firm raised its full-year net
profit forecast to 12 billion yen ($148 million) from 9 billion
yen, partly due to cost cuts.

Exporter shares climbed, with Honda Motor Co (7267.T: ) up 3.3
percent at 2,975 yen and Tokyo Electron (8035.T: ) gaining 2.9
percent to 5,060 yen.

But Resona Holdings (8308.T: ) continued to fall, dropping 8.6
percent to 468 yen, after the bank announced plans to raise up to
$7.4 billion in new shares to repay government bailout funds.
[ID:nTOE6A308B]

Trade slowed on the Tokyo exchange’s first section, with 1.67
billion shares changing hands, down from a one-week high hit on
Friday above 2 billion shares.

Advancing stocks outnumbered declining ones by 3 to 1.
(Editing by Chris Gallagher)

Nikkei hits 3-month closing high; resistance looms