Nikkei hits 6-mth high, Topix 4-mth high, weak yen lifts exporters

Thu Nov 22, 2012 3:15am GMT

* Topix hits highest since July
    * Nikkei trades above 9,300 for the first time since May
    * Foreigners pour new, long money into Japanese market -
fund manager
    * Investors have positions to unwind at 9,400 - analyst

    By Ayai Tomisawa
    TOKYO, Nov 22 (Reuters) - Japan's Nikkei share average rose
to a 6-month high on Thursday, while the broader Topix hit a
4-month high led by gains in carmakers and electronics on
expectations that a sharply weaker yen will boost their
earnings.
    Exporters such as Toyota Motor Corp, Honda Motor Co
 and Canon Inc are among five most traded
stocks by turnover on the board, rising between 2.0 percent and
2.5 percent.
    The dollar rose as high as 82.55 yen, its strongest
level since early April, on a pledge by the main opposition
Liberal Democratic Party, tipped to take power in an election
next month, to push for further central bank easing. A softer
yen allows exporters to earn more when they repatriate overseas
earnings, and boosts their competitiveness. 
    "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.
    Traders said that an increasing number of foreign investors
are returning to the Japanese market due to expectations that an
LDP-led government would push the Bank of Japan to take
aggressive monetary stimulus.  
    "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 a risk of losing
because they believe that Japanese stocks will outperform their
global peers," said Tetsuro Ii, the 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."
    The demands of Japan's opposition leader and probable next
prime minister Shinzo Abe include "unlimited" easing until 2 or
3 percent inflation is achieved, pushing short-term interest
rates below zero and having the BOJ buy bonds issued
specifically to fund public works projects.
    Anticipating resistance from central bankers, Abe has spoken
of possibly rewriting a law guaranteeing the BOJ's independence,
so that the government can force its agenda. 
    "Investors think that the bank may not achieve everything,
but some of the demands are possible," Ii said.
    By the midday break, the Nikkei climbed 1.1 percent
at 9,319.36, trading above the 9,300-line for the first time
since May 2. The broader Topix advanced 0.9 percent to
773.88, the highest level since July 6.
    But with U.S. markets closed for the Thanksgiving holiday on
Thursday and the Japanese market closed on Friday for Labor Day,
volumes may stay low and gains could be trimmed in late trade,
market analysts said.
    They noted that investor sentiment remains upbeat, but
markets are closely watching talks among U.S policymakers on how
to avoid the U.S. "fiscal cliff," which has raised fears about
the direction of the world's largest economy. 
    "A lot of investors have positions to unwind when the Nikkei
reaches 9,400," said Yutaka Miura, senior technical analyst at
Mizuho Securities. "Until there is a clear sign that the U.S.
fiscal cliff is resolved, the Nikkei's upside will likely be
capped around this level as major Japanese stocks are highly
sensitive to the health of the U.S. economy."
    Among other exporters, Advantest Corp surged 2.8
percent to 1,069 yen, Nikon Corp added 3.8 percent to
2,176 yen and Tokyo Electron Ltd gained 1.8 percent to
3,595 yen.
    Japanese shares are widely seen as undervalued as
those listed on the Topix are trading just below book value,
while those on Wall Street's benchmark S&P 500 are at
about 2.1 times book value, according to ThomsonReuters
Starmine.