Nikkei rises to one-month closing high on Greek vote

* Nikkei steps above 8,700 as risk appetite improves
* Finanicals, electronics in favour; defensives underperform

By Dominic Lau
TOKYO, June 18 (Reuters) - Japan's Nikkei share average
topped 8,700 for the first time in a month on Monday after
Greece's pro-bailout parties won a parliamentary majority at
weekend elections, easing fears of a messy euro zone exit.
Investors unwound cautious bets and covered their shorts on
economically sensitive sectors such as financials and mining
firms while defensive utilities fell, but trading remained light
as concerns about the euro zone debt crisis persisted.
"Unfortunately this rally will be a brief one spurred on by
short-covering, but nothing more," said Norihiro Fujito, general
manager of senior investment strategist at Mitsubishi UFJ Morgan
Stanley.
"There's more to the euro zone crisis than just Greece and
if the victorious party don't improve Greeks' lives their
support will switch to (anti-bailout party) SYRIZA and we'll be
back to square one."
The Nikkei rose 1.8 percent to 8,721.02, its highest
closing level since May 22 and breaching above its 25-day moving
average at 8,601.
But it is still down 13.5 percent so far this quarter after
rallying more than 19 percent in January-March when it logged
its best first-quarter performance in 24 years.
Financials were in demand as Greece's immediate fate became
clearer. Nomura Holdings, Japan's top investment bank,
rose 2.6 percent and Daiwa Securities Group added 2.7
percent, while Mitsubishi UFJ Financial Group gained 2
percent and Mizuho Financial Group gained 3.3 percent.
Sharp Corp jumped 5.6 percent after Deutsche Bank
upgraded its rating to "hold" from "sell", saying the stock no
longer looked expensive, while the shift of its display unit to
an unconsolidated affiliate should curb losses.
The battered electronics sector also enjoyed a bounce, with
Sony Corp and Panasonic Corp up 4.2 and 3.5
percent respectively.
Naomi Fink, Japan equity strategist at Jefferies, said
incentives for renewable energy could also benefit select names
in the electronics sector, such as Kyocera Corp and
Murata Manufacturing Co Ltd.
The Nikkei volatility index shed 17.5 percent to a
one-month low. The lower the volatility index, the higher the
risk appetite.
Domestically driven stocks that found favour in last week's
risk-averse climate underperformed the broader market, with Fast
Retailing Co Ltd up 0.7 percent and Softbank Corp
down 0.3 percent. The defensive utility sector
also fell into the red, down 0.5 percent.
"It's a temporary rally but we're seeing broad gains because
the global situation has changed now that the prospect of a
"Drachmageddon' has disappeared," said Fumiyuki Nakanishi,
general manager of investment and research at SMBC Friend
Securities.
The broader Topix rose 1.7 percent to 738.81, also
hitting a one-month closing high. Trading on the main board were
thin with 1.48 billion shares changing hands, or 74 percent of
its daily average for the past 90 days.

MORE POLICY RESPONSE?
Fears of an imminent euro zone exit have been soothed by the
election result, but concerns remain about the health of Spanish
banks, which were granted a 100 billion euro bailout last week,
as well as the euro zone's fiscal health in general.
Investors are hoping for a coordinated response to the euro
zone crisis from the Group of 20 leading economies, which starts
a two-day meeting later on Monday, and many expect further
easing from the U.S. Federal Reserve after its policy meeting
concluding on Wednesday.
Morgan Stanley MUFG on Friday lifted its year-end target for
the Topix to 880, a 19.1 p ercent upside from Monday's close, on
expectations of further monetary easing from central banks.
"Although we had hit post-bubble lows of 695.51 on June 4
from the perceived additional risks put into the euro zone,
Morgan Stanley's house-view is for further easing under our base
case, with a large number of central banks globally to deliver
more easing in the next few quarters," it said in a report.
"As we believe our base case P/E multiple of 15x make sense
in a base case easing scenario, we stand by our preference for
Japanese equities over bonds."
But SMBC Friend Securities' Nakanishi said there was a lower
chance that the Fed would ease since the situation in Greece had
been defused.