Nikkei rebounds as investors go bargain hunting

Gains 0.9% as upbeat Japanese economic growth data trumps concerns about Europe

The Nikkei share average rose 0.9% on Thursday as upbeat Japanese economic growth data trumped worry about Europe and investors shopped for bargains after Wednesday's market tumble left the benchmark down 14% this quarter.

Japan's economy grew 1% in January-March from the previous quarter, powering ahead of other major industrial nations thanks to the rebuilding of the tsunami-battered northeast region, solid consumer spending and recovering exports.

The Nikkei benchmark slipped 0.4% in the morning, stumbling below a support level at 8,800, but later changed gears to close up 0.9% at 8,876.59.

The broader Topix index rose 1.1% to 747.16 .

"The phase of just selling off absolutely everything is over," said Yoshihiko Tabei, chief analyst at Kazaka Securities. "Earnings season has now finished, so if the yen continues as steady as it is investors will be scooping up some nice cheap stocks."

Toshiba Corp put on a robust 5.6% after saying it had halted domestic production of LCD televisions in response to falling prices.

Shares in rival Japanese TV makers Sony Corp and Panasonic Corp, both of which took a dive recently due to record losses on poor sales, also benefitted. Sony rose 3.9% while Panasonic advanced 3.5%. Fellow TV maker Sharp Corp jumped 5.7%.

One trader said that investors were now expecting Toshiba's competitors to follow suit and stop production of LCD TVs.

Fujitsu General Co Ltd, a consumer electronics manufacturer, surged 7.4% and air conditioner maker Daikin Industries Ltd climbed 4.6% after China said it would provide $4.2 billion in subsidies for energy-saving home appliances to boost domestic consumption.

Slowing demand in China and a lacklustre economic recovery in the US, as well as fears of Greece's potential exit from the euro zone, dragged the Nikkei down from a high of 10,255.15 on March 27.

But a brighter outlook for the US emerged overnight, with a reported 2.6% rise in housing starts and 1.1% growth in industrial production in April also injecting a small positive note into the market.

The dollar steadied to above 80 yen on the news, boosting big exporters Toyota Motor Corp, Honda Motor Co Ltd and Nissan Motor Co Ltd between 1.5 and 3.3%.

"There's still uncertainty ahead regarding what happens with Greece, which is why the market has shed so much lately," said Masayuki Doshida, senior market analyst at Rakuten Securities. "But seeing as a resolution is a long way off, the desire to sell has finally been balanced out by the desire to buy."

The Nikkei volatility index fell 7.9%, showing an increase in risk appetite.

Technicals showed the Nikkei was still "oversold", with its 14-day relative strength index (RSI) at 29.9, r ecovering from 24.4 in the morning session. A market with an RSI of 30 or below is considered oversold.

"I expect a short-term technical rebound in the next couple of weeks. But there will be selling pressure should the Nikkei regain around 9,200-9,300," said Yasuo Sakuma, portfolio manager at Bayview Asset Management.

"I think it's a good opportunity to enter the market because valuations are very attractive and the domestic economy should be stronger than expected because domestic demand is strong," Sakuma said.

In the first quarter of 2012, Japan's annualised rate of growth was 4.1%, stronger than the 3.5% expected by analysts, showing a gain in momentum after the economy was stalled by last year's earthquake and tsunami.