Nikkei scales 21-month high as weak yen lifts exporters

Thu Dec 27, 2012 1:05am GMT

TOKYO, Dec 27 (Reuters) - The Nikkei share average climbed
to a 21-month high on Thursday, led by exporters, as the new
Japanese prime minister's vow to battle deflation and a strong
currency weighed on the yen.
    The Nikkei advanced 0.9 percent to 10,325.62, taking
the index deeper into "overbought" territory, with its 14-day
relative strength index at 77.8, far above the 70 which is
considered overbought, and often indicates an imminent pullback.
    "People are back in the office today after the overseas
markets ... and putting on some positions based on what we saw
after the cabinet appointment and LDP policy decision," a dealer
at a foreign brokerage said, referring to the ruling party.
    "It's going to be interesting to see what's going to happen
in the market in the afternoon session and tomorrow because
Tokyo closes pretty much for the entirety of next week. There is
a lot of headline risk that could happen ... I would not be
surprised to see some profit-taking," the broker said.
    Finance Minister Taro Aso said Prime Minister Shinzo Abe has
ordered him to compile a stimulus package without sticking to
the previous government's cap on new bond issuance, signalling a
more aggressive policy to kick-start the ailing economy.
    Exporters benefiting from the yen's weakness included Toyota
Motor Corp, Honda Motor Co, Nikon Corp
 and Panasonic Corp, all up between 0.7 and 1.5
percent.  
    The yen was quoted at 85.65 to the dollar on Thursday after
hitting a more than two-year low of 85.735 yen on Wednesday. 
    A weaker yen helps lift exporters' overseas earnings when
repatriated, thereby improving their competitiveness,
particularly against South Korean and Chinese rivals.
    Insurers also rose sharply, up 1.7 percent, as
the rally in stocks boosted the value of their equity holdings.
    The broader Topix gained 0.9 percent to 855.57.
    The benchmark Nikkei has risen 19.3 percent over the past
six weeks, taking the year-to-date gain for the Nikkei to 22.2
percent, outpacing a 12.9 percent rise in the U.S. S&P 500
 and a 14.7 percent gain in the pan-European STOXX Europe
600. 
    Japanese equities carry a 12-month forward price-to-earnings
ratio of 12.6, slightly cheaper than the S&P 500's 12.8 but more
expensive than STOXX Europe 600's 11.5, data from Thomson
Reuters Datastream showed.
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