Construction firms outperform in Nikkei rebound

* Nikkei recovers from four-week closing low

* Construction sector extends gains; Japan Bridge soars
again

* China Q4 GDP growth slightly above expectations

By Dominic Lau and Mari Saito

TOKYO, Jan 17 (Reuters) - Japan's Nikkei average
advanced on Tuesday after better-than-expected Chinese economic
data and firm demand in a French treasury bill auction that
eased concerns of an imminent flare-up in the euro zone crisis.

Construction and engineering firms extended their
recent gains with the sector index up 2.5 percent on their
expected benefit from reconstruction spending after last March's
massive earthquake and tsunami.

Obayashi Corp, Taisei Corp, Shimizu Corp
and Kajima Corp advanced between 3 and 4.9
percent, while Tobishima Corp shot up 28.8 percent in
heavy volume.

"Most, if not all, of the 100 or so companies on the top
gainers' list are involved in construction or
reconstruction-related industries like cement and other
materials," said Fumiyuki Nakanishi, general manager in the
investment and research department at SMBC Friends Securities.

"It's difficult to buy with nagging worries about Europe
still in the background, but small-cap reconstruction-related
stocks seem to be the sole winners."

The construction sector has risen 6.5 percent so far this
year, versus a flat Topix index of all first-section
shares.

Cement and road companies also rallied, with Japan Bridge
Corp soaring 12.1 percent, taking its gains to more
than 180 percent in two weeks, and Sumitomo Osaka Cement Co Ltd
up 4.6 percent.

"The government is basically driving around in a taxi and
throwing money out of the window," said Nicholas Smith, Japan
strategist at CLSA, referring to extra budgets for the financial
year to March 31.

"The government has already allocated 19 trillion yen ($248
billion) of spending. They are debating about a supplementary
budget of 2.5 trillion yen ... We have got the money but we just
have to decide where to spend it now. It's an absolutely
delicious situation."

The Nikkei was up 0.6 percent at 8,430.73 by the
midday break, below its 25-day moving average near 8,456 but
just above its five-day moving average near 8,429.

The Topix added 0.5 percent to 728.49, and volume on
the index by midday was 52 percent of its full daily average for
the last 90 days.

Japanese stocks fell sharply on Monday despite the Bank of
Japan buying 18.8 billion yen worth of exchange-traded funds to
support the market following mass downgrades of euro zone
countries, including France, by Standard & Poor's.

Industrial robot maker Fanuc Corp was the top
gainer in the Nikkei by weighting, up 2.8 percent and snapping a
three-day losing steak.

Nomura analysts recommended investors to go short on the
electrical appliance and precision instruments segment, however,
and long on the steel and nonferrous metals sector.

They said in a report that the weaker euro was behind their
decision to put electrical appliances and precision instruments
on the short sector candidate list.

On the other hand, concerns about China's economy, weakening
international commodity prices and steel oversupply in East Asia
that had weighed on the steel and nonferrous metals sector have
eased somewhat, they said.
($1 = 76.7100 Japanese yen)

(Editing by Michael Watson)