Nikkei gains, market eyes Greece debt swap
TOKYO (Reuters) - Japan's Nikkei average bounced back from a three-day losing streak on Thursday, lifted by growing expectations that Greece will complete a key debt swap, while a softer yen and signs of recovery in the U.S. labor market underpinned sentiment.
Strong performers included Japan's top investment bank Nomura Holdings (8604.T), which gained 4.7 percent. Megabanks Mitsubishi UFJ Financial Group (8306.T), Mizuho Financial Group (8411.T) and Sumitomo Mitsui Financial Group (8316.T) advanced between 2.3 and 2.7 percent.
The benchmark Nikkei .N225 was up 192.90 points or 2.0 percent to 9,768.96, almost fully recouping losses in the previous three sessions.
The Nikkei volatility index .JNIV eased 2.5 percent. The lower the volatility index, the higher the risk appetite.
Domestic investors picked up shares after the three-day correction, which market participants said was the buying opportunity that many were waiting for after February's more than 10 percent rally.
"I do not feel that we've had our last buying opportunity for March. A lot of domestic investors failed to buy at all in February, so they're picking up now, but I do think there will be at least one more correction in March," said Kenichi Hirano, operating officer at Tachibana Securities.
Japan's real estate sector .IRLTY.T outperformed, up 4 percent, after market players said Tokyo office vacancy rate data compiled by real estate broker Miki Shoji declined for the first time in five months.
"What we see gaining today -- insurance, real estate and brokers -- these so-called "bubble" stocks are supported by excess market liquidity. These have become the core stocks that are driving the market," said Hirano, adding that there was also buying related to the March settlement of options and futures on Friday.
The broader Topix index .TOPX rose 1.6 percent to 836.16.
Also lifting shares was a Wall Street Journal report that the U.S. Federal Reserve is considering a new type of asset purchases to spur growth.
"In the next two or three months, QE 2.5 or QE 3-lite is possible, and the fact that there is less concern of a strong yen, then we can be more bullish towards the middle of this year," said Shun Maruyama, an equity strategist at BNP Paribas in Tokyo.
Maruyama has a target of 10,000 for the Nikkei by mid-2012, representing an upside of 2.4 percent from the current level.
Trading volume on the main board dipped, with 2.11 billion shares changing hands, down from 2.25 billion shares on Wednesday.
Country equity performance in 2012:
U.S. ADP vs non-farm payrolls jobs report:
APPLE SUPPLIERS, EXPORTERS IN DEMAND
U.S. private sector employment data beat economists' expectations overnight and reinforced views that the country's economic recovery is gaining traction and hiked expectations for Friday's U.S. non-farm payroll figure.
"U.S. is recovering, slowly but consistently .. .but that's not to say that markets can continue to rally consistently because that recovery pace is extremely slow," said Stefan Worrall, director of equity cash sales at Credit Suisse in Tokyo.
"Employment figure came in very strong last night, but the jury is still out on Greece," he said.
Market players awaited the completion of Greece's bond swap offer, but worries receded after major banks and pension funds backed the offer, making it increasingly likely that the deal will be approved and clear the way for a bailout package to avert an immediate default on its debt.
Japan's technology companies that are part of Apple Inc's (AAPL.O) supply chain gained broadly after the Silicon Valley company took the wraps off a faster 4G-equipped iPad.
Renesas Electronics Corp (6723.T) rose 4.1 percent, Toshiba Corp (6502.T) gained 1.8 percent and electronic parts maker Taiyo Yuden Co Ltd (6976.T) put on 2.6 percent.
The yen dipped against the U.S. dollar, increasing the appeal of Japanese exporters, with Toyota Motor Corp (7203.T) up 2.6 percent, TDK Corp (6762.T) adding 2.8 percent and Canon Inc (7751.T) gaining 2.2 percent.
Societe Generale remained upbeat on Japanese equities despite this year's rally. "The Japanese equity risk premium has started to decrease from its recent all-time high level. However, the upside potential on Japanese equities remains high, as their valuation (including the risk premium itself) remains attractive," it said in a note.
In terms of valuations, the Topix carries a 12-month forward price-to-book ratio of 0.97, much cheaper than the S&P 500's .SPX 1.96 and the STOXX Europe 600's .STOXX 1.36, Thomson Reuters Datastream data showed.
March, the final month of Japan's fiscal year, tends to be the strongest month for the Nikkei, with an average monthly rise of 1.43 percent for the index between 1972 and 2011.
(Additional reporting by Dominic Lau)