Nikkei hits 7-month high close, tracks China rebound

By Antoni Slodkowski and Ayai Tomisawa

TOKYO (BestGrowthStock) – Japan’s Nikkei average rose to its highest close in seven months on Tuesday in holiday-thinned trade, as a rebound in Chinese equities encouraged investors to pick up shares after a brief pull-back the day before.

Investors shrugged off a slightly stronger yen against the dollar and aggressively added blue-chip exporters.

Comments from a Chinese vice premier that China supports efforts by the EU to calm global markets in the wake of Europe’s debt crisis lent further support, bolstering the euro-sensitive precision machinery sector. Canon Inc rose 1.6 percent.

“Investors are buying on dips, pushing the Nikkei higher after yesterday’s losses,” said Takashi Ohba, a senior strategist at Okasan Securities.

Major electronics maker Sony Corp gained 2.7 percent, camera maker Nikon Corp climbed 2.8 percent and Mitsubishi Motors Corp added 2.5 percent.

“The Nikkei was flat last week and traders waited for any positive factors to trade on — they got a good opportunity today so the market is posting solid gains,” said Ohba.

Tuesday’s jump was the biggest daily gain by the Nikkei in almost three weeks.

He said traders’ next target looms around 10,420.74, where futures and options contracts expiring in December settled earlier this month.

The benchmark Nikkei gained 1.5 percent or 154.12 points to 10,370.53, while the broader Topix rose 0.9 percent to 906.21.

Adding to positive sentiment was a calming of the situation on the Korean peninsula, where North Korea stepped back from confrontation over military drills by the South on Monday and reportedly made a new offer on nuclear inspections.

VOLUME SAGS

Lower volume added to market volatility as foreign investors, who have been net buyers of Japanese equities for the last six weeks and helped the Nikkei rally some 13 percent since the beginning of November, were less active due to the approach of the year-end holidays.

Only 1.6 billion shares changed hands on the Tokyo Stock Exchange’s first section, well below last week’s daily average of around 2.1 billion shares.

But analysts said the Nikkei may be re-energized next week when foreign investors return from holiday.

“We may see some window-dressing buying at the end of the month, which is something of a trend every year,” said Fujio Ando, senior managing director at Chibagin Asset Management, adding that investors may target large cyclical stocks.

Tokyo shares are still down around 1.7 percent for the year to date, while the MSCI index for Asian stocks excluding Japan shows a 12.6 percent jump and Wall Street’s Standard & Poor’s 500 Index has added 11.8 percent.

“Japan is still lagging behind recoveries in other markets. I wouldn’t be surprised if the index rises further by the end of the year,” said Tsuyoshi Segawa, equity strategist at Mizuho Securities.

Bank of Japan kept monetary policy on hold on Tuesday and said it would steadily purchase various assets and provide longer-term funds through its 35 trillion yen ($417.8 billion) asset buying and market operation fund, to ensure that the effects of its monetary easing steps spread across the economy.

Shares of Shinsei Bank surged 8.9 percent in heavy trade after the bank said it would offload its stake in struggling consumer lender Aplus Financial to a subsidiary, in a move expected to lower the risk of the mid-size Japanese bank raising capital.

Skymark Airlines jumped 5.8 percent after its CEO said it would almost triple its fleet to as many as 50 aircraft over the next four years.

($1=83.77 Yen)

(Editing by Edmund Klamann)

Nikkei hits 7-month high close, tracks China rebound