Japan's Nikkei jumps 2 pct on exporters, recovers from Cyprus blow

Tue Mar 19, 2013 7:23am GMT

* Exporters and financials gain
    * Cyprus parliament to vote on bailout later on Tuesday
    * Underlying trend still bullish- analysts
    * TPP should be positive for Japanese equities - analyst

    By Ayai Tomisawa
    TOKYO, March 19 (Reuters) - Japan's Nikkei average rebounded
2 percent on Tuesday, regaining some ground lost in the previous
session as fears receded that a controversial bailout proposal
for Cyprus could reignite the euro zone crisis.
    Analysts said that the disruption to the Japanese market
from the unusual bailout plan for Cyprus seems to have run its
course, although the Japanese equities market is prone to
volatility because it is vulnerable to a rise in the yen when
global market uncertainty increases. 
    "It looks like the bailout issue will be contained in Cyprus
itself and it probably won't spread to the euro zone. As the
Japanese market was rallying lately, Monday's selling served as
a good opportunity for correction," said Yutaka Miura, a senior
technical analyst at Mizuho Securities. "But European debt
issues will likely take years to be resolved, and we need to be
prepared for a sell-off like this again as the Japanese market
could easily get hit by a strong yen when investors buy the
yen."
    The Nikkei added 247.60 points to 12,468.23 after
sliding 2.7 percent on Monday, its biggest one-day drop in 10
months. The index is just 0.74 percent away from a 4-1/2 year
high of 12,560.95 marked last Friday.
    Ahead of a parliamentary vote in Cyprus that will either
secure the island's financial rescue or threaten default, euro
zone ministers have urged Cyprus to let smaller savers escape a
controversial levy on bank deposits.
    Still, investors are concerned that forcing ordinary
citizens to fund bank rescues up front, through a tax on
deposits, is setting a precedent that could lead to other
bailout countries imposing something similar on depositors.
 
    On Tuesday, Monday losers such as exporters and financials
were bought back. Sony Corp surged 6.8 percent and was
the most-traded on the main board by turnover. Mazda Motor Corp
 jumped 5.6 percent and Nikon Corp rose 3.4
percent.
    The broader Topix gained 1.7 percent to 1,045.89 in
relatively thin trade, with 2.84 billion shares changing hands.
Last week, average daily volume was 3.72 billion shares.
    The benchmark Nikkei has rallied nearly 44 percent since
mid-November when Prime Minister Shinzo Abe embarked on
aggressive fiscal and monetary expansion campaign to revive the
ailing economy.
    Investors are also focused on the U.S. Federal Reserve's
two-day policy-setting meeting starting on Wednesday and the
change of leadership at the Bank of Japan this week.
    "Investors are ready to chase the market higher to 13,000 on
hopes for easing by the new leadership next month," said
Mizuho's Miura. 
    
    STILL UPBEAT
    Goldman Sachs remained upbeat on Japanese equities, lifting
its 12-month Topix target to 1,250 from 1,100.
    "Without a doubt, going 'long Japanese equities' has become
one of the most popular trades among global investors in 2013.
This is not to say, however, that every long-only foreign
investor is neutral or overweight Japan," Goldman Sachs said in
a note.
    "We estimate that if the underweight gap of 2.8 percentage
points of EAFE-benchmark mutual funds were to close, this could
imply roughly $42 billion of potential foreign inflows from this
investor segment." (EAFE=Europe, Australasia, Far East) 
    Foreign investors bought 1.12 trillion yen ($11.7 billion)
worth of Japanese shares in the week through March 9, their
largest net purchase since the Ministry of Finance began
collecting the data in 2005.
    Market participants said that Japan's decision to join
Trans-Pacific Partnership (TPP) membership talks was acting as a
long-term catalyst to chase the market higher.
    "This is, in our view, clear evidence that Abe is not just
about 'buying growth' ahead of the July elections, but really
about a fundamental pro-growth policy change," Jesper Koll, head
of Japanese equity research at JPMorgan, wrote in a note, adding
that banks would be a prime beneficiary if TPP forced a rise in
competition, which would mean that companies would re-invest in
buildings and facilities as well as accelerate mergers and
acquisitions.