Nikkei rallies as weak yen pushes exporters into spotlight

MARKETS-JAPAN-STOCKS:Nikkei rallies as weak yen pushes exporters into spotlight

tokyo  August 16, 2012, 8:50 IST

tokyo  08 16, 2012, 09:00 IST

 

Japan's Nikkei share average climbed above the 9,000 level for the first time in a week on Thursday morning, with exporters in focus as the yen weakened against the dollar following strong U.S. data.

Exporters Toyota Motor Co <7203.T>, Fanuc Ltd <6954.T>, Canon Inc <7751.T> put on between 2 and 3.4 percent as the Japanese currency struck a one-month low against the greenback, meaning revenues earned abroad will translate into bigger profits when repatriated.

The Nikkei advanced 1.4 percent to 9,046.10, breaching both its 200-day moving average at 8,961.07 and rising well clear of the psychologically key 9,000 level. If it closes above 8,978.60 it will hit a five-week high.

"This could mark a turning point for the Nikkei if the focus switches back to exporters and large caps for a while, and away from the defensive names that investors have focused on in recent months," said Yasuo Sakuma, portfolio manager at Bayview Asset Management.

"However, there are very few market players around this week so there's still lots of scepticism about, and we should remain cautious," he added.

Life insurers bounded ahead as improved risk sentiment pushed yields of "safe haven" Japanese 10-year bonds to a two-month high. Dai-ichi Life Insurance Co Ltd <8750.T> surged 5.2 percent to a five-week high while T&D Holdings Inc <8795.T> added 4 percent.

The oil and coal Topix subindex was not far behind with a gain of 2.3 percent.

The sector was helped by Idemitsu Kosan Co Ltd <5019.T> jumping 6 percent after Mitsubishi UFJ Morgan Stanley upgraded the oil refiner to "outperform" from "neutral" on Wednesday and hiked its target price to 8,100 yen from 7,200, saying its first quarter results had allayed fears about future earnings.

The benchmark index was also supported by heavyweight Japan Tobacco Inc <2914.T>, which regained the 4.8 percent it lost on Wednesday after the Australian Supreme Court upheld a new law forcing tobacco companies to package cigarettes in plain olive-coloured packs with no logos as part of its anti-smoking strategy.

The yen eased to 79 yen against the greenback after U.S. industrial output expanded 0.6 percent last month, the fastest pace since April, while manufacturing showed a solid improvement homebuilder sentiment improved to a 5-year high in July.

The broader Topix climbed 1.0 percent to 755.06. Volume was slightly low, at 46.8 percent of its full-day 90-day average by the midday break.

SURPRISINGLY STRONG?

Despite data showing foreign investors were net sellers of Japanese stocks for the seventh week in a row last week, market players said increased expectations of policy action from euro zone leaders to tackle the region's debt crisis were underpinning recent strength in the Nikkei.

The benchmark index is now just 0.6 percent off the two-month high it hit on July 4 after putting in its best weekly performance since February last week.

"I think it could hold on to 9,000 as there are a lot of events coming up in September, and statements from European leaders have suggested that we can hope for bond purchases or a bigger bail-out for Spain," said Ishiguro of Okasan Securities.

Even troubled Sharp Corp <6753.T> managed to gain 3.6 percent, although that was after repeatedly dipping into negative territory as investors remained unconvinced that the company's sale of a key solar cell factory and some of its Tokyo offices, as reported in the Yomiuri daily, could change its fate.

"There are very deep, tenacious fears that Sharp will go bankrupt, and the company is going to find it hard to stamp those out no matter what they do," said Hideyuki Ishiguro, senior strategist at Okasan Securities.