Nikkei set to test 23-month high as weak yen buoys exporters

Thu Jan 10, 2013 11:34pm GMT

TOKYO, Jan 11 (Reuters) - Japan's Nikkei share average is
set to test a 23-month high on Friday, with exporters likely to
extend gains after the yen hit a 2-1/2 year low on hopes that
the central bank will ease monetary policy aggressively.
    The Nikkei was likely to trade between 10,600 and 10,850 on
Friday, strategists said, after rising 0.7 percent to 10,652.64
on the previous day. If the index trades above 10,800, it will
be the first time since February 2011.
    Nikkei futures in Chicago closed at 10,775, up from
the close in Osaka of 10,660.
    "Investors are already aware that the market is overheated.
But even with such caution, they are ready to add more Japanese
shares to their portfolios," said Yutaka Miura, a senior
technical analyst at Mizuho Securities.
    But he added that buying could stall if the yen weakens
sharply in a short-period of time, such as hitting 90 yen to the
dollar on the day. The dollar last traded at 88.90 yen,
its highest since June 2010.
    "A weak yen is generally positive for Japanese exporters,
but a steep drop from the current level may make them cautious,"
Miura said, adding that investors may also be wary of taking a
large bet before a three-day weekend.
    Markets will be closed on Monday in Japan for a public
holiday.
    Traders said that sentiment was also boosted after the
Nikkei business daily reported Prime Minister Shinzo Abe as
saying in an interview that the Bank of Japan should make
pursuing maximum employment a consideration. 
    Thursday's gains took the Nikkei deep into "overbought"
territory. Its 14-day relative strength index stood at 75.83,
above the 70-mark which is deemed overbought and often indicates
the market is ripe for a correction in the near term.
    On Thursday, the broader Topix index gained 1.1
percent to 889.02 in active trade, with 4.17 billion shares
changing hands, the largest volume since March 2011.
    "Even if profit-taking hits the market before the BOJ's
policy meeting (scheduled on Jan 21-22), the impact should be
limited as long as the market can keep up with high volume,"
said Hiroichi Nishi, assistant general manager of equity
research at SMBC Nikko Securities.
    The yen has been weakening since Abe called on the Bank of
Japan in mid-November to adopt a bolder policy to revitalise the
economy, including setting an inflation target of 2 percent. The
Nikkei has since rallied 23 percent.
    
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> -Oil rises after Saudi Arabia cuts output             
    STOCKS TO WATCH
    
    --Komatsu Ltd 
    Komatsu will reduce its construction machinery offerings by
around 20 percent by fiscal 2015 to focus on developing
next-generation products, the Nikkei said. 
    
    --Honda Motor Co 
    Honda said on Thursday it will invest $23 million to build a
hybrid version of its popular Accord sedan at its plant in
Marysville, Ohio. 
    
    -- Fast Retailing Co 
    Fast Retailing raised its annual profit forecast to a record
after sales rose at home outlets of the Japanese retailer's
flagship Uniqlo casual clothing chain and price cuts and chilly
autumn weather spurred a quarterly profit jump.
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