Nikkei rises but still marks 4th straight week of loss

 

The senior dealer said buy orders outpaced sell orders by three to one and there was a good balance between long-only investors and hedge funds, although long-only players were a bit more active.

 

"For the time being, the Nikkei is trying to find itself where it should be after the crazy opening," he said, referring to Nikkei June futures and options contracts settlement, known as "special quotation".

 

The Nikkei ended up 241.14 points at 12,686.52 after trading as high as 12,900.65, though it was still holding below the Ichimoku cloud in a bearish sign. For the week, it was down 1.5%, marking its fourth straight weekly loss, its longest such losing streak since October.

 

The Osaka Securities Exchange said after the close that Nikkei futures and options contracts for June settled at 12,668.04.

 

BEAR MARKET

 

On Thursday, the Nikkei tumbled 6.4% to its lowest close since April 3, the day before the Bank of Japan unveiled sweeping stimulus to revive the economy, and below the Ichimoku cloud for the first time since mid-November. It also took the slide from a 5-1/2-year peak hit on May 23 to nearly 22%, slumping into a bear market and wiping about $700 billion off the Nikkei's market capitalisation.

 

Over the past three weeks, trading in the Nikkei has been volatile. The 30-day implied volatility for the benchmark jumped to 42.3% on Thursday, its highest since the March 2011 earthquake and tsunami, according to Thomson Reuters Datastream.

 

Investors, mainly hedge funds, have been cutting their long Japanese equities and short yen positions on concerns that the Fed will roll back its stimulus and after the Nikkei had rallied more than 80% from mid-November to that multi-year high.

 

Tsukasa Shimoda, the founder and president of Galleyla Investment, said he was cautious in the short-term but the recent sell-off offered good opportunity in the medium-term.

 

"If I see a better chance, I will increase the net positions," said Shimoda, whose hedge fund has a size of $10 million.

 

The broader Topix index advanced 1.2% to 1,056.45 in active trade on Friday, with trading volume hitting a one-week high of 3.77 billion shares.

 

Beaten-down real estate companies were in demand, up 4.4%, while exporter Toshiba Corp  gained 2.9%.

 

Nomura Securities was bullish, lifting its Nikkei year-end target to 18,000 from 16,000, despite the recent sell-off.

 

"We do not brush off the recent stock market turmoil lightly. Indeed, we see it as significant because it constitutes a challenge to Abenomics," it said in a note.

 

"If share prices fall back to where they were before the BOJ announced its new phase of monetary easing, this could prompt market observers to pronounce Abenomics a failure."

 

The sell-off has taken Japanese equities' valuations, measured by the 12-month forward price-to-earnings, to 14.1 from a three-year high of 16.3 touched two weeks ago, Datastream showed.