Nikkei surges on easing hopes, set for 10th straight weekly gain

Fri Jan 18, 2013 3:31am GMT

* Investors buy derivatives - trader
    * Credit Suisse upgrades Japan on short-term
    * Sony surges on New York building sale

    By Ayai Tomisawa
    TOKYO, Jan 18 (Reuters) - Japan's Nikkei share average rose
more than 2 percent on Friday and is set for a 10th straight
week of gains as exporters advanced on expectations the central
bank will ease monetary policy aggressively next week, putting
more downward pressure on the yen.
    The Nikkei rose 2.2 percent to 10,842.24 points by
the midday break. If it ends above Tuesday's 10,879.08, it will
be the highest close in 32 months.
    The 10-week winning streak will be the longest since 1987.
    The Bank of Japan and the government have agreed to set 2
percent inflation as the central bank's policy target in a joint
statement likely be issued next week, although no clear
timeframe has been fixed to meet the goal, a deputy economics
minister said on Friday. 
    Exporters led Friday's gains, with Toyota Motor Corp
 adding 2.0 percent, Honda Motor Co up 3.5
percent and Panasonic Corp climbing 3.4 percent.
    "There still is strong expectations on 'Abenomics'," said
Hiroichi Nishi, assistant general manager of equity information
department at SMBC Nikko Securities.
    The Nikkei has rallied about 25 percent over the past two
months, starting from when incoming leader Shinzo Abe called for
further policy easing, causing the yen to weaken.
    Nishi said that the market is increasingly encouraged by the
prospect of exporters' earnings growing at a better pace in 
coming years. 
    A trader at an European brokerage said investors are buying
call options at a strike price at 11,000, 1.5 percent above the
current Nikkei level.
    "Recently, derivatives buying stands out," the trader said.
    Credit Suisse upgraded Japan to 5 percent overweight on a
short-term basis from the benchmark level, with a year-end
target of 12,000 on the Nikkei.
    "Fiscal and monetary policy are increasingly proactive: the
BoJ's balance sheet is set to expand in 2013 by more than those
of other central banks, even before the potential change in the
BoJ inflation target (up to 2 percent)," Credit Suisse analysts
wrote in a report, adding that the BOJ has a track record of
being unconventional such as buying REITs and exchange traded
funds.
    Credit Suisse's short-term recommendations included
exporters Murata Manufacturing Co and Mitsubishi Heavy
Industries Ltd, and other reflationary stocks like
banks, real estate stocks and life insurers.
    However, the brokerage added, "On a 1- to 5-year view, we
are more cautious due to poor demographics, weak corporate
governance and a primary budget deficit of 9 percent of GDP."
    On Thursday, the yen fell to a more than 2-1/2-year
low of 90.14 yen to the dollar. The yen last traded at 89.82 to
the dollar. A weak yen lifts exporters' overseas earnings when
repatriated.
    "Foreign investors are becoming increasingly eager to add
more Japanese stocks," said Tetsuro Ii, the chief executive of
Commons Asset Management.
    "Abe has been successful in lifting investor sentiment. A
good result must be delivered, and we still don't know about
that, but the fact that he boosted investors' risk appetites is
very positive," he said.
    The central bank's policy meeting is Jan. 21-22.
    On Friday, Sony Corp jumped 6.7 percent to a
six-month high of 1,093 yen after it announced that its US
subsidiary would sell its New York headquarters building for
$1.1 billion. Sony expects a gain on the sale of $685 million,
which will be recorded as operating income. 
    Sony was the most-traded stock on the main board by turnover
at the midday break.
    Topix added 1.9 percent to 907.00 in active trade,
with 1.81 billion shares changing hands by the break.
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