Nikkei scales 7-month high past key 9,500 on China data, yen fall

Sun Dec 2, 2012 10:15pm EST

* Nikkei up 0.7 pct, Topix adds 0.5 pct
    * China Nov PMI rises to 7-month high
    * Construction firms up on repair work expectations -
traders

    By Dominic Lau
    TOKYO, Dec 3 (Reuters) - Japan's Nikkei share average
climbed to a seven-month high on Monday above the key 9,500-mark
as a weaker yen and improved Chinese manufacturing data buoyed
sentiment.
    By the midday break, the Nikkei was up 0.7 percent
at 9,508.26 after rising as high as 9,525.82, or 0.8 percent.
    The benchmark has rallied 9.8 percent, led by exporters,
over the past 2-1/2 weeks and the yen has fallen over the same
period on speculation the Bank of Japan will be pushed to adopt
aggressive policy action after a Dec. 16 national election. The
Nikkei gained 5.8 percent last month to log its best monthly
performance since February.
    Leader of the main opposition Liberal Democratic Party,
Shinzo Abe, has been calling for the Bank of Japan to take
bolder action, including setting a 2 percent inflation target
and embarking on "unlimited easing". The LDP is expected to win
the most seats and form the government after the election.
    "I don't believe all that Abe says, but at least the new
government will push the BOJ to ease monetary conditions," Ryota
Sakagami, chief strategist at SMBC Nikko Securities, said.
    "My understanding of the current market move is its mainly
due to the catch up of high-beta exporting companies due to the
global economic trend ... This process of catch up will continue
until the Nikkei hits 10,000." 
    Some exporters remained in demand, with Canon Inc,
Ricoh Co Ltd and Nissan Motor Co up between
0.8 and 1.8 percent.
    Toyota Motor Corp was flat and the sixth-most
traded stock on the main board by turnover as the auto maker
still struggled to revive sales in China, part of a broader
slump Japanese car firms are suffering as a result of a
diplomatic dispute between the two neighbours. 
    Still, Toyota shares have surged 15.5 percent in the past
2-1/2 weeks.
    But a senior trader at a foreign bank, who has more sell
orders than buy requests, said the index was unlikely to hold
above 9,500.
    "The 9,500-level is going to be very difficult to crack," he
said. 
    The currency was quoted at 82.37 yen to the dollar on Monday
after falling as low as 82.75 yen on Friday which was near a
7-1/2-month low of 82.84 touched on Nov. 22.
    A rise in China's official purchasing managers' index to a
seven-month high of 50.6 in November from 50.2 in October also
lent support to the Japanese market as China is the country's
top export market. 
    
    CONSTRUCTION FIRMS BOOSTED
    Construction machinery makers Komatsu Ltd and
Hitachi Construction Machinery Co Ltd, which have
significant exposure to China, advanced 1.1 and 1.7 percent,
respectively.
    Traders said they were also boosted by expectations of
repair works on Japan's transport infrastructure, after a tunnel
on a major highway in central Japan collapsed on Sunday, killing
at least three people and starting a blaze. 
    Japan Bridge Corp surged 26 percent, P.S.
Mitsubishi Construction Co Ltd jumped 20.8 percent and
Hazama Corp climbed 17.4 percent.
    The broader Topix put on 0.5 percent to 784.96 in
active trade, with volume at 60 percent of its full daily
average for the past 90 trading days.
    BNP Paribas said in a note that it proposed investors buy
Nikkei dividends futures expiring in 2016 on expectations that
Japanese exporters' earnings would benefit from a softer yen and
Abe's reflationary policy, and hedge it with put swaptions on
2018 dividends futures.  
    The benchmark Nikkei is up 12.5 percent this year, in line
with a 12.6 percent rise in the U.S. S&P 500 and a 12.8
percent gain in the pan-European STOXX Europe 600.
    But Japanese equities carry a 12-month forward price-to-book
ratio of 0.9, much cheaper than the S&P 500's 1.9 and the STOXX
Europe 600's 1.4, data from Thomson Reuters Datastream showed.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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