Nikkei climbs 1.6 pct to 6-1/2 month high on softer yen

Thu Nov 22, 2012 12:24pm IST

Related Topics

* Nikkei up 3.8 pct this week, 2nd straight weekly rise
    * Topix climbs to 4-month closing high, up 3.3 pct this week
    * Exporters gain as yen hits 7-1/2-month vs dollar

    By Dominic Lau
    TOKYO, Nov 22 (Reuters) - Japan's Nikkei average climbed 1.6
percent to a 6-1/2-month closing high on Thursday, boosted by
gains in automakers and electronics companies on expectations
that a sharply weaker yen will boost their earnings.
    Exporters such as Toyota Motor Corp, Honda Motor Co
, Nissan Motor Co and Canon Inc were
among the seven most-traded stocks on the main board by
turnover, and gained between 2.3 and 3.5 percent.
    A 4 percent slide in the yen against the dollar in the last
week and a half, driven by expectations that the Bank of Japan
would take aggressive monetary policy under a likely new
government, has increased the allure of long-suffering exporter
shares and pushed Japanese stocks higher.
    A softer yen, which hit a 7-1/2-month low of 82.59 yen to
the dollar on Thursday, inflates exporters' overseas earnings
when repatriated and lifts their price competitiveness,
particularly against South Korean and Chinese rivals.
    The Nikkei ended 144.28 points higher at 9,366.80,
its highest closing level since May 2 and taking the index near
"overbought" territory, with its 14-day relative strength index
at 69.5. Seventy or above is deemed overbought.
    The benchmark rose 3.8 percent this week, its
second-straight weekly gain and bringing its advance to 10.8
percent for the year. Japan's financial markets will be closed
on Friday for a national holiday.
    The Nikkei's year-to-date performance is slightly ahead of
the U.S. S&P 500's 10.6 percent rise and the pan-European
STOXX Europe 600's 10.5 percent gain.
    "Investors are increasingly relieved that exporters'
earnings will be better than expected if the yen's weakness
continues," said Hiroichi Nishi, general manager at SMBC Nikko
Securities.
    Japanese company earnings have been weak this quarterly
reporting season, with 56 percent of Nikkei companies
undershooting market expectations, according to Thomson Reuters
StarMine data. That compared with 54 percent in the previous
quarter.
    Market participants said the improved sentiment towards
Japanese equities, which have been underweight by many global
investors, would likely prompt foreign investors to return to
the Japanese market.
    Investor demand for Nikkei call options, which essentially
bet on the index to trade higher, was brisk, exceeding demand
for put options.
    According to Reuters data, Thursday's most-traded Nikkei
index option was a call with a strike price of 9,750, a 4.1
percent upside from Thursday's close, and a December maturity
.
    The next most-traded was a December call at 10,000
, followed by another December call at 9,500
 and a December put at 9,000.
        
    GETTING INTO THE GAME
    "Foreigners have just started to pour in new, long money.
Many of them are still underweight on Japanese stocks, but they
fear that if they remain underweight, there is risk of losing
because they believe that Japanese stocks will outperform their
global peers," said Tetsuro Ii, chief executive officer of
Commons Asset Management.
    "We've been getting questions from foreign investors asking
how far the Bank of Japan will likely give in to Abe's demands."
    Shinzo Abe, the leader of the main opposition party Liberal
Democratic Party (LDP), has called for more extreme measures
from the central bank, including setting a 2 percent inflation
target, to pull the export-reliant economy out of deflation.
    The latest data from Japan's Ministry of Finance showed
foreign investors turned net buyers of Japanese stocks last week
after three weeks of net selling. They bought a net 133.3
billion yen ($1.6 billion) of shares in the week through Nov.
17.
    Jun Yunoki, equity analyst at Nomura Securities, said
Japanese retail investors were more likely to be sellers in this
rally.
    "Usually they are slow buyers. If the market starts heating
up, they will start buying," he said.
    "People who have suffered losses in their margins will use
this opportunity to sell. I think it will take a little bit more
time for retailer investors to massively buy."
    The upbeat sentiment also pushed Japan's top brokerage
Nomura Holdings up 6.2 percent to a near seven-month
high and rival Daiwa Securities 4.6 percent higher.
    The broader Topix climbed 1.2 percent to 776.43 to a
four-month closing high in active trade, with 2.03 billion
shares changing hands, up from Wednesday's 1.87 billion and last
week's average of 1.79 billion.
    Adding to the positive mood from the weaker yen, data from
Thomson Reuters I/B/E/S showed the pace of deterioration in
Japanese companies' earnings outlooks has slowed slightly in
November.
    Their one-month earnings momentum -- analysts' earnings
upgrades minus downgrades as a total of estimates -- stood at
-10.9 percent, versus -12.2 percent in October.
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