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Nikkei posts biggest gain since June 2013; Abenomics in focus as ministers quit
October 20, 2014 / 6:36 AM / 3 years ago

Nikkei posts biggest gain since June 2013; Abenomics in focus as ministers quit

* News GPIF raising stock allocation to 25 pct underpins
    * Resignation of two cabinet members a big blow to Abe -

    By Ayai Tomisawa
    TOKYO, Oct 20 (Reuters) - Japan's Nikkei share average
surged 4.0 percent on Monday to post its biggest daily rise
since June 2013 as investors took heart from upbeat U.S. data
and the weaker yen lifted exporters such as Toyota Motor Corp
 and Honda Motor Co.
    Also underpinning the market was news that Japan's $1.2
trillion public pension fund will likely raise its allocation to
domestic stocks to about 25 percent from 12 percent at present.
    People familiar with the process told Reuters that a
weighting in the middle of the 20-30 percent range is the main
proposal for an impending reallocation of the fund's asset mix 
and is under final discussion within GPIF. 
    The Nikkei share average added 578.72 points to end
at 15,111.23, recouping most of the losses posted last week.
    Upbeat U.S. consumer confidence supported investor sentiment
and lifted risk appetites. The Thomson Reuters/University of
Michigan index of consumer sentiment unexpectedly rose in early
October to its highest level since July 2007. Separate data
showed groundbreaking on new homes rose more than expected last
    Traders said investors scooped up recently-battered stocks
after the Nikkei tumbled 5 percent last week on concerns about
faltering global growth and the stronger yen.
    "Selling seemed to have reached its climax last week, so
people bargain-hunted shares after gains overseas calmed our
nerves," a fund manager at a Japanese asset management firm
    But some analysts remained cautious, and said any rebound
may be short-lived.
    "With Halloween just around the corner, the market was
spooked by 'ghosts' and these ghosts will probably stick around
longer," said Hiroyuki Nakai, chief strategist at Tokai Tokyo
Research Center, citing persistent concerns about the sputtering
European economy, worries about what could happen after the U.S.
Federal Reserve ends its bond-buying campaign, and the effects
of the Ebola epidemic.
    Toyota jumped 5.2 percent, Honda soared 3.5 percent and
Panasonic Corp surged 4.5 percent after the dollar rose
0.4 percent at 107.345 yen, moving further from a
five-week low of 105.90 hit the previous week.
    NEC Corp rose 6.5 percent after the Nikkei business
daily reported its operating profit for the April-September
period was likely to be about 20 billion yen, compared to just
shy of 400 million yen in the previous year.
    While shares in the Japanese market soared mostly on 
external factors on Monday, a domestic political scandal could
have a negative impact in the mid-to-long term, analysts said.
    Japanese Prime Minister Shinzo Abe said on Monday afternoon
that he had accepted the resignations of Trade Minister Yuko
Obuchi and Justice Minister Midori Matsushima over questionable
political spending and alleged violation of election law,
    "This is a serious blow to Abe's administration, maybe the
most serious one since his administration began two years ago,"
said Kyoya Okinawa, head of global equities at BNP Paribas.
    "The fact that two of his five female members resigned is
very bad and should hurt his support rate in the longer term as
boosting women in his cabinet and in the workforce was supposed
to be part of his growth strategy."
    Okazawa said that if Abe's approval rate falls, he will
likely have a difficult time pushing through measures to revive
the economy.
    The broader Topix jumped 4.0 percent to 1,224.34,
and the new JPX-Nikkei Index 400 gained 4.0 percent
to 11,142.42.

 (Editing by Eric Meijer)

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