Nikkei gains for 9th day, longest run in 21 years
* Hitachi jumps after news it will make 5 units wholly owned
* Nomura, Daiwa climb after profit report
* Shipping firms drop after cutting forecasts
* Some say market could lose steam after earnings season (Adds MSCI Japan's price-to-earnings ratio figures)
By Aiko Hayashi
TOKYO, July 27 (Reuters) - The Nikkei share average rose 1.5 percent on Monday, gaining for a ninth straight day, on growing hopes for better-than-expected Japanese corporate earnings and an economic recovery, with top brokerage Nomura Holdings (8604.T) gaining.
Hitachi Ltd (6501.T) climbed after the Nikkei business daily said the electronics group planned to spend up to 300 billion yen ($3.2 billion) to turn five listed subsidiaries into wholly owned units. Two sources close to the matter later confirmed the report. [ID:nT98959]
The benchmark Nikkei began a brisk rally earlier this month thanks to a batch of stronger than expected U.S. corporate results such as from Intel Corp (INTC.O). The Nikkei has surged nearly 12 percent from this month's low of 9,050.33, bringing it more than 40 percent above its March lows.
The upbeat momentum helped the Nikkei to book its longest run of gains since 1988 on Monday, though some market players said it was not particularly surprising, considering it came on the heel of nine days of losses and the market does not appear to be overheated.
"Upbeat U.S. earnings, particularly from the high-tech sector, rekindled optimism about earnings also from domestic companies that are sensitive to the health of the economy," said Masaru Hamasaki, a senior strategist at Toyota Asset Management.
"Everyone had thought corporate earnings in the first half would be dismal, but if actual numbers turn out to indicate otherwise, the current bullish sentiment in the market will likely receive a further boost," Hamasaki said.
But shares of Japan's top three shippers, including top-ranked Nippon Yusen KK (9101.T), fell after they slashed their profit forecasts due to a delay in the recovery of automobile and container shipping and higher fuel costs.
Hamasaki said the weaker outlooks from the shipping firms was not a big surprise considering lacklustre market conditions in April-June.
The benchmark Nikkei .N225 gained 144.11 points to 10,088.66, its highest close since June 12. It briefly touched 10,179.59, its highest level in nine months.
The broader Topix .TOPX rose 0.9 percent to 928.26.
The 12-month forward price-to-earnings ratio for the MSCI Japan .MSCIJP has fallen slightly in the past two months to 26.9 times, compared with a 15-year average of 28.5 and an average of 21.1 so far this decade, according to data from global estimates tracker IBES.
Soichi Yamazaki, chief analyst at Fukoku Capital Management, said Nidec Corp's 6594.OS earnings reported on Friday were more solid than expected, leading investors to believe other electronic parts makers will also report positive surprises.
"The market is rallying as it is trying to price in the possibility that the economy could recover sooner than previously thought," said Yamazaki, adding that there might be more scope for shares to gain.
Nidec rose 3.5 percent to 6,790 yen after the maker of hard disk drive motors raised its operating profit forecast to 50 billion yen for the year ending next March, up 11 percent from its previous estimate, on cost-cutting efforts.
Still, others said the market's focus will switch to the progress of a recovery in the real economy after next week after a bulk of important earnings results is reported this week.
"Considering the still difficult state of the economy, there's a possibility that the market will lose its upbeat momentum from next week on," said Hajime Nakajima, deputy general manager at Cosmo Securities' equity department.
Investors are waiting for a slew of earnings reports this week from blue-chip heavyweights including Sony Corp (6758.T).
Shares of Hitachi (6501.T) advanced 3.4 percent to 304 yen.
Hitachi will launch tender offers as early as next month to buy the shares it does not already own in Hitachi Maxell (6810.T), Hitachi Plant Technologies Ltd 1970.T, Hitachi Information Systems Ltd 9741.T, Hitachi Software Engineering Co 9694.T and Hitachi Systems & Services Ltd 3735.T, the sources said.
Shares of the five subsidiaries all powered higher by nearly 20 percent.
Stocks of companies with upbeat earnings prospects climbed, pushing up the market.
Nomura gained 3.1 percent to 820 yen and Daiwa Securities Group (8601.T) jumped 4.5 percent to 559 yen after the Nikkei said the two brokerages likely swung to a net profit in the April-June quarter of 10-20 billion yen. [ID:nT73276]
Softbank (9984.T) rose 3.8 percent to 1,917 yen after the Nikkei said the wireless carrier's April-June group operating profit likely rose 20 percent from a year earlier, topping 100 billion yen, due to growth in communication fees in its mobile operations and solid business in other areas.
Among stocks that fell, Nippon Yusen lost 4.6 percent to 399 yen after it said it now expects an operating profit of 20 billion yen for the year ending in March 2010, down 62 percent from its earlier estimate.
Mitsui O.S.K. Lines Ltd (9104.T) fell 3.5 percent to 599 yen and Kawasaki Kisen Kaisha Ltd (9107.T) sank 4 percent to 362 yen after both firms cut their full-year earnings forecasts.
Some 2.1 billion shares changed hands on the Tokyo exchange's first section, compared with last week's daily average of 2.3 billion.
Advancing stocks outnumbered decliners by 2 to 1. (Additional reporting by Rika Otsuka; Editing by Hugh Lawson)
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