Nikkei marks best one-day rise in three weeks

 

Japan's Nikkei share average climbed more than 2% to mark its biggest one-day rise in three weeks on Tuesday, as investors scooped up battered stocks such as financials, which had fallen from recent peaks into bear market territory.

 

Hopes for further buying from Japanese pension funds also lent some support to the index after sources told Reuters that Japan's government is set to urge public pension funds, which have more than $2 trillion in assets, to increase their investment in equities and overseas assets.

 

Trade remained volatile. The Nikkei has tumbled 15% since hitting a 5-1/2 year high on May 23 on worries over slowing growth in China and a potential pullback in the US Federal Reserve's massive stimulus programme.

 

"On the institutional side, people are still very mixed. They were early sellers in the day. Throughout the day we picked up more buyers. Overall we are kind of flattish," a senior dealer at a foreign bank said.

 

"Retail investors are back in the game today," he said. "The market has nicely bounced off 13,000 today ... The fact that it actually bounced and somebody was actually there to buy on dips is quite positive."

 

The Nikkei ended 2.1% higher at 13,533.76 in a choppy session that had seen it lose as much as 1.5% at one point. The index lost 3.7% on Monday.

 

The senior dealer said the market was likely to remain volatile in the next few days.

 

NOMURA IN DEMAND

 

Nomura Holdings, Japan's top brokerage, jumped 7.6 % and was the most traded stock on the main board by turnover after sinking 8.4% in the previous session. Rival Daiwa Securities Group surged 11.9%.

 

The securities sector was the best performing sector, up 9.5% after the previous session's 9% slide. It is still down nearly 19% from a 4-1/2 year high touched on May 15.

 

The broader Topix index climbed 2.6% to 1,125.47, with trading volume hitting a one-week high of 5.12 billion shares.

 

Despite the recent sharp pullback, the Nikkei is still up 9.5 % since April 4, when the Bank of Japan Governor Haruhiko Kuroda stunned global financial markets with a sweeping stimulus programme to revive growth. The benchmark has rallied 30 % this year after Prime Minister Shinzo Abe promised expansionary fiscal and monetary policies to lift growth.

 

BNP Paribas said in a note that it has picked Japan as one of the equity indexes to short with a one-month horizon. Other countries on which its proprietary model had a negative view were Austria, Mexico and Brazil, while it suggested going long Taiwan, Italy, Netherlands and Germany. The model was negative on Japan last month.