Nikkei rises to 7-mth high above 9,500; in overbought territory
* Nikkei and Topix both rise 0.8 pct * Nikkei enters "overbought" territory * Exporters lead gainers on softer yen * LDP looks set to win a majority on Dec. 16 election * Sharp up, Hon Hai reportedly still in talks By Dominic Lau TOKYO, Dec 6 (Reuters) - The Nikkei average climbed to a seven-month high above the 9,500 mark on Thursday, buoyed by a weaker yen on persistent speculation the central bank would adopt bolder action to pull Japan out of deflation under a likely new government. The Nikkei rose 0.8 percent to 9,541.21 by the midday break, taking the index to "overbought" territory, with its 14-day relative strength index at 70.4. Seventy or above is deemed overbought, which often signals a possible pull back in the near-term. Some market participants also said the move was not yet a convincing break of 9,500, noting that the benchmark has pierced the level in recent days only to end the day lower. "The market has been struggling with this 9,500 level on the Nikkei a few times. We need a convincing breakthrough there before it goes anywhere," a senior trader at a foreign bank said. He added that volume has been thinning out lately, and his buy and sell orders were even this morning. Domestic investors have been selling exchange-traded funds so any further immediate lift from the market would have to come from foreigners, he said. Shinzo Abe, the leader of the main opposition Liberal Democratic Party who is expected to win a Dec. 16 general election, has been calling for the Bank of Japan to embark on "unlimited easing" and set an inflation target of 2 percent. The latest opinion polls showed the LDP was on course to win a solid majority on its own. His comments have weakened the yen over the past three weeks, while the Nikkei has rallied 10.1 percent, led by exporters. Foreign investors were net buyers of Japanese equities last week for the third straight week. They bought a net 184.3 billion yen ($2.2 billion) of shares in the week through Dec. 1, down from 275.8 billion yen in the previous week, finance ministry data showed. "People in the market tend to get excited and buy equities ahead of elections, just to get disappointed and offload them a few months down the road. This happens every time," said Yuuki Sakurai, chief executive of Fukoku Capital Management. "I don't think Abe's policies such as changing the BOJ law are good for the market. On the contrary, further monetary easing isn't going to solve any problems in Japan. If anything, it will worsen the BOJ's balance sheet and prompt further downgrades from rating agencies." EXPORTERS ASCEND Exporters in demand included Toyota Motor Corp, camera and printer maker Canon Inc, air conditioner maker Daikin Industries Ltd and Honda Motor Co , up between 0.9 and 3.5 percent. The yen was quoted at 82.45 to the dollar after falling 0.7 percent to 82.46 yen on Wednesday. It touched a 7-1/2-month low of 82.84 yen to the dollar on Nov. 22. Sharp Corp surged 5 percent to a two-month high after a Taiwan newspaper quoted Hon Hai Precision Industry chairman as saying that Qualcomm's tie-up with the struggling TV maker will not affect Hon Hai's talks with Sharp to become its biggest shareholder. Hon Hai's chairman reiterated that he expects to reach a decision with Sharp before March 2013, the newspaper reported. The broader Topix advanced 0.8 percent to 788.10, with 0.98 billion shares changing hands in the morning session versus 1.84 billion for the full day of Wednesday and last week's daily average of 2.01 billion. Adding to the positive mood, sentiment among Japanese manufacturers has edged up for the first time since July, a Reuters poll showed, in a sign that the economy may have bottomed out even as sluggish global demand continues to weigh on business confidence. The benchmark Nikkei is up 12.8 percent this year, in line with a 12.1 percent rise in the U.S. S&P 500 and a 13.2 percent gain in the pan-European STOXX Europe 600. But Japanese equities are more expensive than their European peers, with a 12-month forward price-to-earnings ratio of 12.1 versus STOXX Europe 600's 11.1, data from Thomson Reuters Datastream showed. The S&P 500 has a 12-month forward P/E of 12.5.
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