Nikkei rallies 2.4 pct to highest since March 2011 quake

Tue Mar 27, 2012 2:44am EDT

* Nikkei and Topix both climb 2.4 pct
    * Sumitomo Metal surges 5.9 pct, confirms Alaska gold mine
    * Megabanks advance; Gree falls

    By Dominic Lau	
    TOKYO, March 27 (Reuters) - Japan's Nikkei average hit its
highest closing level on Tuesday since a massive earthquake and
tsunami triggered a radiation crisis a year ago, buoyed by
indications the U.S. Federal Reserve may keep its supportive
monetary policy.	
    The benchmark Nikkei rose 2.4 percent, or 236.91
points, to 10,255.15, while the broader Topix also
climbed 2.4 percent to 872.42.	
    "The market was very healthy indeed in the run-up to the
earthquake last year. Japan is the premier play on global
growth. The world was growing and Japan should have been the
biggest beneficiary and it got hit by the earthquake," said
Nicholas Smith, Japan strategist at CLSA.	
    "We are not quite back there yet ... We have moved up a long
way in a short while. There are people who are worried that we
are overheated but we are not overvalued. The value in the
market is still absolutely incredible."	
    The earthquake and tsunami hit Japan on March 11 last year.	
    The Nikkei has surged 21.3 percent so far this year on a run
of robust U.S. economic data and easing programmes by global
central banks, taking its 14-day relative strength index to
"overbought" territory at 73.7.	
    The index is on track for its best quarterly performance
since the second quarter of 2009, when the index surged 22.8
percent.	
    But Japanese equities were still considered undervalued
compared with their global peers. The Topix carries a 12-month
forward price-to-book ratio of 0.98 compared with the S&P 500's
2.0 and STOXX Europe 600's 1.4, Thomson Reuters Datastream data
showed.     	
    Blue-chips bounced back on Tuesday from a recent pullback in
Tokyo markets, with Honda Motor Co up 3.5 percent,
Toyota Motor Corp adding 3.6 percent, Canon Inc
 gaining 3.5 percent and investment bank Nomura Holdings
 climbing 4.1 percent.	
    Sumitomo Metal Mining Co jumped 5.9 percent after
it said it had confirmed a new gold deposit containing 40 tonnes
at its mine in Alaska.    	
    "Certainly the market has been caught a little bit short,"
said Stefan Worrall, director of equity cash sales at Credit
Suisse in Tokyo.	
    "There were quite a lot of shorts that have emerged in the
last few days on caution that we might have a pullback."	
    The Nikkei lost 1.2 percent last week and eked out modest
gains on Monday.	
    Just as the global rally looked to have run out of steam,
comments from Fed Chairman Ben Bernanke on Monday reinforced the
view that further easing from the central bank may be possible.
             	
    Nearly 2.27 billion shares changed hands on the main board,
up from 1.13 billion shares on Monday.   
 	
	
    BANKS UP, GREE OFF	
    Japan's megabanks were also in demand on Tuesday, with
Mitsubishi UFJ Financial Group, Sumitomo Mitsui
Financial Group and Mizuho Financial Group up
between 2.5 and 4.3 percent.	
    Jun Yunoki, equity strategy analyst at Nomura, said 
domestic passive funds were expected to buy in order to reinvest
dividends, which was likely to push the index higher.	
    "If we take pre-disaster foreign buying as neutral weight,
we are not closing in yet on that amount of buying," Yunoki
said.	
    "I think foreign buying will continue as they are still
slightly underweight in Japanese equities."	
    Bucking the overall market trend on Tuesday was mobile
gaming operator Gree Inc, which shed 1.9 percent.	
    It extended the previous day's sharp loss after a magazine
report cited a government official as saying an investigation
could begin in April or May over additional charges for special
items in its games.