Japan's Nikkei hits 7-mth closing high on China, soft yen

Wed Dec 5, 2012 1:38am EST

* Nikkei gains 0.4 pct, Topix ends flat
    * Fast Retailing up 3 pct on strong Nov same-store sales

    By Dominic Lau
    TOKYO, Dec 5 (Reuters) - Japan's Nikkei average rose to a
seven-month closing high on Wednesday, lifted by sharp gains in
Chinese equities after comments by Communist Party chief raised
hopes for an economic recovery in the world's second-largest
economy.
    Renewed investor appetite for riskier assets, as evidenced
by gains in the euro and Asian stocks, helped weaken the yen
against the dollar, which rose 0.5 percent to 82.25 yen,
and in turn, helped cut the losses of some Japanese exporters'
shares.
    Gains in index heavyweight Fast Retailing Co, which
reported strong November same-store sales at its Uniqlo casual
clothing chain in Japan, also supported the market.  
    The Nikkei ended 0.4 percent higher at 9,468.84
points in a choppy session, after trading in range of 9,376.97
to 9,515.86.
    "China and the yen are the main drivers," a trader at a
foreign bank said.
    Remarks by Xi Jinping that the Chinese authorities would
continue fine-tuning economic policies in 2013 to ensure stable
growth tempered concerns over whether U.S. lawmakers can break
an impasse to avert the so-called fiscal cliff before year-end.
    Construction machinery makers Komatsu Ltd and
Hitachi Construction Machinery Co Ltd, which have
significant exposure in China, gained 0.7 and 1.8 percent,
respectively. 
    Exporters headed higher included Nissan Motor Co,
Olympus Corp and Kyocera Corp, gaining between
0.4 and 1.9 percent.
    Sharp Corp climbed 4 percent after the struggling
TV maker said U.S. chipmaker Qualcomm Inc will invest
as much as $120 million in the Japanese firm, a cash injection
likely to make it Sharp's biggest shareholder.
    Short-selling interest in Sharp slipped slightly, with 92.78
percent of its stock that is available to be borrowed out on
loan as of Dec. 3, down from 93.46 percent on Nov. 30, according
to data provider Markit.
    
    WEAK YEN THE KEY
    Led by exporters, the Nikkei has risen 9.3 percent over the
past three weeks while the yen has weakened as investors bet the
Bank of Japan would step up its monetary easing policy under a
likely new government after a Dec. 16 general election.
    Shinzo Abe, leader of the main opposition party, has called
for the Bank of Japan to embark on "unlimited easing" and set an
inflation target at 2 percent.
    The benchmark Nikkei is up 12 percent this year, in line
with a 11.9 percent gain in the U.S. S&P 500 and a 13
percent rise in the pan-European STOXX Europe 600.
    Credit Suisse expected the Nikkei to reach 10,400 by the end
of 2013, 9.8 percent above where it closed on Wednesday,
although it kept Japanese equities at 'benchmark' in its global
portfolio model because it said Japan had the tightest monetary
conditions of any region despite cheap valuations.
    "The key is the speed with which the Bank of Japan will
print money. Expectations might already be too high, given yen
shorts are close to six-year highs and the implied inflation
rate is 1.3 percent," the brokerage said in a report.
    Credit Suisse said it favoured exporters with positive
earnings momentum and cheap valuations versus their peers, which
include oil and gas explorer Inpex Corp, tyre maker
Bridgestone Corp and financial firm Orix Corp,
and reflation plays such as banks and real estate
companies.
    The broader Topix index was flat at 781.86 on
Wednesday, with 1.84 billion shares changing hands, up from
Tuesday's 1.74 billion but down from last week's average of 2.01
billion.           
    Fast Retailing rose 3 percent and was the second-most traded
stock on the main board by turnover after it said same-store
sales at its Uniqlo chain in Japan surged 13.7 percent in
November from a year earlier due to strong sales in down jacket
and winter underwear.