Nikkei set to hit 7-month high on yen, but rangebound

TOKYO (BestGrowthStock) – Japan’s Nikkei average is expected to hit a new seven-month peak on Thursday as the dollar hovers near three-month highs against the yen, bolstered by U.S. data showing rising industrial production in November.

But gains in the Nikkei, which after shedding some 2.2 percent on the year is still an underperformer globally, may be capped, with investor appetite for risky assets dented as euro zone bond worries resurfaced after Moody’s warned it may downgrade Spain’s debt.

Nikkei futures in Chicago closed at 10,375, up 0.7 from the Osaka close of 10,300, suggesting that Tokyo shares will slowly continue their advance after rising some 12.6 percent in the last six weeks.

“Traders will watch the dollar/yen rate closely today, and that market may gain momentum if we get closer to 85 yen per dollar,” said Kazuhiro Takahashi, general manager at Daiwa Capital Markets.

“Wall Street struggled yesterday, but that won’t affect the Tokyo market much as U.S. shares struggled partly due to the strong dollar, which is a positive factor for the Nikkei,” Takahashi said.

With the dollar trading at around 84.30 yen in morning trade in Asia, exporters are set to post gains as many of them based their earnings estimates on assumptions that the dollar/yen rate would stand at around 80-83 yen.

The benchmark Nikkei (.N225: ) is expected to move in a tight range of 10,200 to 10,400, analysts said, after staying almost unchanged on Wednesday.

Market players said the Nikkei has been trapped in a narrow range this week as domestic investors aggressively took profits on its rally since the beginning of November, while foreign investors continued buying financial shares seen as undervalued.

STOCKS TO WATCH:

–Honda Motor (7267.T: )

Shares in India’s Hero Honda Motors (HROH.BO: ) fell as much as 9 percent on Wednesday, after a TV channel reported the board of its Indian partner has approved the termination of the joint venture with Honda Motor.

–Idemitsu Kosan Co (5019.T: )

Idemitsu, Japan’s third-largest refiner, said on Wednesday it expects to restart a problem-hit 33,000 barrels per day residue fluid catalytic cracker (RFCC) at its Hokkaido refinery sometime next week.

–Toyota Motor Corp (7203.T: )

Toyota said on Wednesday it has received 12,000 orders for its Etios sedan in India since it began taking orders on December 1, putting it well on track to meet the car’s annual sales target of 70,000 units.

–Otsuka Holdings (4578.T: )

Otsuka will apply next year for a patent on a new drug that could become the successor to its best-selling schizophrenia drug, Abilify, its CEO said.

–Mining companies

The Japanese government plans to tighten management of its mineral resources by demanding exploration permits and overhauling the granting of mining rights, the Nikkei business daily said.

(Reporting by Antoni Slodkowski; Editing by Joseph Radford)

Nikkei set to hit 7-month high on yen, but rangebound