Nikkei recovers from Thursday's sell-off; Sharp shines

Thu Sep 20, 2012 10:46pm EDT

* Sharp shares jump on report of capital tie-up with Intel
    * Japan Tobacco rises on reassuring Imperial Tobacco update
    * Nikkei down 0.2 pct this week, set for 1st weekly fall in
3 weeks

    By Dominic Lau
    TOKYO, Sept 21 (Reuters) - Japan's Nikkei average rose on
Friday, rebounding after the previous session's sharp fall as
investors took comfort that U.S. stocks were largely steady,
shrugging off fears over soft manufacturing data from China,
Europe and the United States. 
    Embattled TV maker Sharp Corp was the focus after
the Mainichi newspaper said it is in talks with U.S. chipmaker
Intel Corp on a capital alliance that would offer a
possible lifeline to the firm as discussions with Taiwan's Hon
Hai Precision Industry Co Ltd stall.
    Sharp, which denied the report, surged 5.5 percent on short
covering and was the most-traded stock on the main board by
turnover. 
    The Nikkei advanced 0.6 percent to 9,142.29 after
shedding 1.6 percent on Thursday to a one-week closing low and
giving up the gains from Wednesday when the Bank of Japan eased
monetary policy.
    "The market was a bit oversold yesterday ... Obviously China
was a bit weak and a little bit of disappointed reaction to this
BOJ easing," a senior trader at a foreign bank said.
    "We are even buy-to-sell. It seems to be more domestic
sectors rising today ... I wouldn't have thought too much upside
from here being a Friday."
    Gains in Japan Tobacco Inc, up 3.3 percent after
rival Imperial Tobacco rose 2.7 percent overnight
following a reassuring trading update, also supported the
market.
    The broader Topix index gained 0.5 percent to 757.75
in light trade, with 44 percent of its full daily average for
the past 90 days.
    "Once investors cover their short positions, the market will
shift to fundamentals. But unfortunately, fundamentals are not
good at the moment," said Shun Maruyama, chief Japan equity
strategist at BNP Paribas.
    "With the second quarter results announcements around
mid-October to early November, people will start taking short
positions ... expecting earnings to be revised down."
    He said he kept his Nikkei year-end target at 9,300, an 1.7
percent upside from current levels, even though the U.S. Federal
Reserve, the European Central Bank and the BOJ had announced
further stimulus.
           
    CHINA PLAYS
    Sputtering growth in China, the world's second-largest
economy and Japan's biggest trading partner, and anti-Japan
protests over a territorial dispute, remained a concern.
    Panasonic Corp said it did not know when it will be
able to resume production at its protest-damaged factory in the
Chinese port city of Qingdao, and it could not yet give an
estimate on how the plant closure will affect its earnings.
 The stock eased 1.6 percent.
    About 40 percent of Japanese firms see friction with China
affecting their business plans, with some considering pulling
out of the country and shifting operations elsewhere, a Reuters
poll showed. 
    Construction machinery makers Komatsu Ltd and
Hitachi Construction Machinery Co Ltd, which have
significant exposure to China, shed 1.9 and 1 percent,
respectively.
    Steelmakers, whose fortunes are also closely tied
to Chinese and global demand, lost 1.7 percent.
    The Nikkei is down 0.2 percent so far this week. If it were
to finish with current loss, it would be the first weekly fall
in three weeks.
    Capital flow data from Japan's Ministry of Finance showed
that foreign investors were net buyers of Japanese stocks last
week for the second straight week after two weeks of net
selling.
    For the year, the Nikkei is up 8.1 percent, trailing a 16.1
percent rise in the U.S. S&P 500 and a 12.3 percent gain
in the pan-European STOXX Europe 600. 
    Still, Japanese equities have a similar valuation to
European shares, with a 12-month forward price-to-earnings ratio
of 11.1, versus STOXX Europe 600's 11 and S&P 500's 12.9,
according to Thomson Reuters Datastream.
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