Nikkei edges down after 7-mth high as profit-taking kicks in

Fri Dec 7, 2012 2:30am EST

* Nikkei holds above 9,500 mark for 2nd day in row
    * Profit-taking may continue into the next week - analysts
    * Nikkei futures and options settlement in focus
    * Sharp extends gains on short-covering

    By Ayai Tomisawa
    TOKYO, Dec 7 (Reuters) - Japan's Nikkei share average ended
slightly lower on Friday, coming off a seven-month high, as
profit-taking kicked in on a near month-long rally that has been
inspired by yen weakness on expectations of bold central bank
action.
    Although the Nikkei managed to hold above the 9,500 mark for
a second day in a row, on the charts it is just shy of
'overbought' territory and some analysts said that profit-taking
could continue into the week ahead.
    Its 14-day relative strength index stands at 69.0. A level
of 70 or above is deemed overbought, and can often signal a
pullback in the near term.
    Some analysts said foreigners, especially hedge funds such
as commodity trading advisers, had started selling Nikkei
futures.
    "Now that the index ended above 9,500, they are unwinding
their positions," said Norihiro Fujito, senior investment
strategist at Mitsubishi UFJ Morgan Stanley Securities.
    Fujito added that more position unwinding of futures may be
seen next week ahead of a quarterly December Nikkei 225 futures
and options settlement on Dec. 14.
    The Nikkei dropped 0.2 percent to 9,527.39 after
hitting a 7-month high of 9,572 earlier in the session. It has
gained 10 percent over the past 3-1/2 weeks.
    Spurring gains has been a weakening in the yen after Shinzo
Abe, the leader of the opposition party expected to win a Dec.
16 general election, called for the Bank of Japan to embark on
"unlimited easing" and set an inflation target of 2 percent.
    Kyoya Okazawa, head of global equities and commodity
derivatives at BNP Paribas in Tokyo, said many foreigners in the
market remained sceptical of the potential for change but had
been forced to chase the rally higher as it gained momentum.
    "They are sceptical about Japan changing, the BOJ changing,"
he said.
    The benchmark Nikkei is up 12.7 percent this year, slightly
ahead of a 12.4 percent rise in the U.S. S&P 500 but
behind a 14 percent gain in the pan-European STOXX Europe 600
 index. 
    A Reuters poll showed half of Japan's manufacturers say
their top request for the winner of the election is a push to
weaken the yen, which they see as critical to reviving the
country's economy. 
    
    
    U.S. PAYROLLS DATA 
    The broader Topix index added 0.2 percent to 790.24
in active trade, with 2.09 billion shares changing hands on the
main board. This week, average daily trading volume was 1.90
billion shares.
    Investors are waiting on November nonfarm payrolls data due
at 1330 GMT to see how much superstorm Sandy disrupted U.S.
economic activity.
    Economists in a Reuters survey forecast 93,000 jobs were
created in the United States last month compared with 171,000 
in October, while the unemployment rate is seen at 7.9 percent.
    Electronics stocks weakened, with Nikon Corp 
shedding 1.6 percent and Toshiba Corp dropping 1.1
percent. 
    But automakers rose, with Nissan Motor Co and Honda
Motor Co, up 0.1 percent and 0.6 percent respectively.
    Sharp Corp surged 8.5 percent to a three-month
high, extending the previous session's 9.9 percent jump on short
covering. A newspaper quoted Hon Hai Precision Industry's
 chairman as saying that Sharp's tie-up with Qualcomm
Inc will not affect Hon Hai's talks to invest in the
struggling Japanese company.
    Short-selling interest in Sharp has fallen lately, although
it still remains high with 91.41 percent of its stock that is
available to be borrowed out on loan as of Dec. 5, down from
93.46 percent on Nov. 30, according to data provider Markit.
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