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* Panasonic soars 17 pct, Sharp adds 5.5 pct in heavy trade * Volume highest since March 2011 for both Nikkei and Topix * Sony jumps, still undervalued - analyst * Morgan Stanley MUFG ups Topix target to 1200 by year-end By Ayai Tomisawa TOKYO, Feb 4 (Reuters) - Japan's Nikkei share average hit a fresh 33-month peak on Monday as exporters kept rising and hints of recovery for troubled consumer electronics companies Panasonic Corp and Sharp Corp attracted retail investors. Panasonic jumped 17 percent - rising by its one-day limit of 100 yen - to a nine-month high of 392 yen after reporting a return to profit in the last quarter and sticking with its full-year earnings forecast as it moves from loss-making TVs to household appliances. Bailed-out Sharp jumped 5.5 percent after saying Friday it had eked out quarterly operating profit, improving its chances of convincing lenders and shareholders that it remains viable. Panasonic and Sharp were among the day's five most heavily-traded stocks. "Buying in these shares stemmed from a combination of leverage trading and a bit of short-covering by retail investors," a fund manager at a U.S. asset management firm said. "Unlike such exporters as autos, consumer electronics stocks had been bought before their fundamentals were showing a recovery. Investors jumped on the stocks after seeing that their earnings are recovering, but I wonder if the rallies may last," he said. Sony Corp, the most traded stock on the board, soared 7.5 percent on optimism about the earnings report and forecasts it will unveil on Thursday. "There are high expectations for the new games console after the Playstation 3, particularly because people think it can beat Nintendo, which is doing pretty badly," said Yoshihiko Tabei, chief analyst at Kazaka Securities. "Ideally Sony's main business will return to profit so that it doesn't need to sell off its assets any more - but it's price-to-book ratio is still 0.7, so it's still very cheap," Tabei added, saying that the softer yen is also spurring gains for the company. The Nikkei, which rose for a fifth straight day, gained 0.6 percent to a closing high of 11,260.35 after the dollar strengthened on strong U.S. jobs and manufacturing data. The Nikkei's volume hit 3.54 billion shares, the highest level since March 2011. The broader Topix gained 1.4 percent to 955.75 in heavy trade, with 4.45 billion shares changing hands on the main board, the highest since March 2011. Last week's average daily trading volume was 3.42 billion shares. Financials, which lifted the Topix on Monday, also remained in focus, with megabanks Mizuho Financial Group Inc and Sumitomo Mitsui Financial Group Inc advancing 4.9 percent and 5.6 percent, respectively. "We think major banks' share price performance will be strong for the time being owing to the upturn in the political and economic environment in the wake of the change of government and improved sentiment toward bank stocks among Japanese and nonresident investors," Nomura Securities wrote in a report. It added that Japanese bank shares still look undervalued in spite of being robust since December. Nomura retains its "bullish" stance on the banking sector, with Mitsubishi UFJ Financial Group and Mizuho its top picks. Morgan Stanley MUFG Research raised Topix's target to 1200 from 910 at the end of 2013, while saying it expects the dollar/yen to reach 100 by the fourth quarter of this year. "We believe the equity markets have further to travel within our 'expectations phase' in discounting the impact of Abenomics in driving a sustained improvement in Japan's growth and corporate ROE," the brokerage wrote in a report. MORE WEAK YEN, UPSIDE IN STOCKS EXPECTED The Japanese currency, already on a rapid downward trend due to an aggressive campaign of fiscal and monetary expansion from new Japanese Prime Minister Shinzo Abe, traded at 92.65 yen , just an inch away from a 2-1/2 year high of 92.97 on Friday. Analysts said that the dollar is expected to further strengthen against the yen due to a recovery in the U.S. economy, which is likely to lift the Japanese market in coming months. "I expect that foreign investors will increasingly become aware of the risk of not owning Japanese stocks," said Michiro Naito, executive director of equity derivatives strategy at JPMorgan, adding that he expects that the Nikkei to hit around 14,000 in late March if the yen trades at 100 yen to the dollar. U.S. employment grew modestly in January, with 157,000 jobs added. That was slightly below expectations, but Labor Department revisions showed 127,000 more jobs were created in November and December than previously reported. "If the U.S. economy recovers and the Fed cuts back on buying Treasuries, there is certain to be a sharp increase in interest rates from the current level that is so low it can be called a bubble. Higher interest rates would also make the dollar stronger," wrote Ryoji Musha, president of Musha Research Co, in a report.