Nikkei rises on foreign buying but rally may fade

* Nikkei up 1.1 pct on day, gains 3.6 pct on week

* Foreigners’ record buying helps Nikkei

* Buying may continue until ex-dividend, could fade
thereafter

* Domestic investors staying to sidelines for now

* Construction equipment makers shine

By Hideyuki Sano and Ayai Tomisawa

TOKYO, March 25 (Reuters) – The Nikkei average rose on
Friday to round off a week of gains as foreign investors scooped
up battered shares, but their buying could ebb next week on
persisting concerns about a crippled nuclear plant and power
cuts.

Foreign investors’ net buying of Japanese shares reached a
record high last week, the week after a devastating earthquake
hit northeastern Japan, Ministry of Finance data showed, and
traders say their buying continued this week.

Overseas investors bought a net 891 billion yen ($11
billion) in Japanese stocks in the week of March 14-18, the
highest since records began in 2005.

Some analysts said foreign buying may continue before the
ex-dividend date on March 28 but others were worried that their
buying — the main driver of the market rebound since last week
— may peter out soon.

“Many companies downgraded their earnings estimates this
week and some halted dividends for this year,” said Hiroyuki
Fukunaga, chief executive of trading information provider
Investrust. “Both trends will likely continue next week, putting
the market under pressure and souring sentiment.”

The benchmark Nikkei ended the day up 1.1 percent or
101.12 points at 9,536.13, helped by broad optimism towards the
global economy and a rise in U.S. shares ahead of forthcoming
earnings reports.

On the week, the Nikkei gained 3.6 percent, consolidating
around 9,500 in a narrow 200-point range as investors cautiously
watched developments at the quake-crippled Fukushima nuclear
plant.

The broader Topix index gained 0.4 percent to 857.38
on the day, for a weekly gain of 4.4 percent. On Friday,
advancing shares outpaced declining ones by 922 to 638.

OVERSOLD SHARES

Analysts also said the overall market got a lift as
investors bought on dips, with some technical indicators showing
that Japanese stocks are heavily oversold.

The Nikkei is now trading about 6 percent below its 25-day
moving average at 10,116.

“Also, more than 60 percent of stocks on the Tokyo stock
exchange’s main board are trading below their book value, so
it’s time to buy back shares while watching problems at the
nuclear plant carefully,” said Hiroichi Nishi, general manager
at Nikko Cordial Securities.

At the end of the week, the Nikkei’s price-to-book ratio
stood at 1.1, roughly half that of the U.S. S&P 500 and Hong
Kong’s Hang Seng benchmark.

About 3.15 billion shares changed hands on the first section
of the Tokyo Stock Exchange on Friday, still above the average
of the past three months. Still, trading volume appears to be
declining after peaking on Tuesday last week, when the Nikkei
plunged about 10 percent.

Domestic institutional investors, who will end their
business year on Thursday next week, are unlikely to turn up as
buyers at least until March 31 and possibly longer as they wait
for more information about damage from the quake to emerge, some
traders said.

Investrust’s Fukunaga said the Nikkei will likely move
between 9,000 and 9,600 over the next five sessions.

But some market players also said the market could test the
200-day moving average, which stood at 9,822 on Friday.

“(In the medium term), psychological support is seen around
9,000, while there may be more room to rise as far as 9,800,
which is near the 200-day moving average,” said Mitsushige
Akino, chief fund manager at Ichiyoshi Investment Management.

Construction equipment makers rose on expectations
of reconstruction-related demand as well as higher resource
prices. Komatsu Ltd gained 4.7 percent to 2,795 yen.

Shares in food processor Nichirei jumped 5.7
percent to 355 yen after the Nikkei business daily reported it
would join forces with the Itochu group in the
frozen-food business, taking on most of the lost production at a
tsunami-damaged factory operated by an Itochu subsidiary in
northern Japan.

Sony Corp gained 3.3 percent to 2,634 yen after
Deutsche Securities raised its rating on the stock to “buy” from
“hold” on expectations of rising sales in its chip and gaming
businesses.
($1 = 80.985 Japanese Yen)

(Additional reporting by Antoni Slodkowski and Chikafumi Hodo;
Editing by Chris Gallagher)

Nikkei rises on foreign buying but rally may fade