Nikkei eases, investors cautious after recent sharp rally

Tue Dec 11, 2012 1:45am EST

* Nikkei eases 0.1 pct, Topix off 0.3 pct
    * Suzuki Motor up on brokerage note; Fuji Heavy Ind falls
    * Power companies down, Japan Atomic Power may decommission
plant

    By Dominic Lau
    TOKYO, Dec 11 (Reuters) - Japan's Nikkei share average
dipped on Tuesday, although it held above the key 9,500-mark, as
investors stayed cautious over signs that the index is
overbought after a near 10 percent rally over the past month.  
    The Nikkei ended 0.1 percent lower at 9,525.32, but
supported by its five-day moving average at 9,520.09. 
    The fall took the index away from "overbought" territory,
but its 14-day relative strength index still stood near 70, a
level which is deemed overbought and often signals possible
near-term pull back. 
    The benchmark has risen 9.9 percent over the past month
while the yen has softened after Shinzo Abe, the leader of the
main opposition party which is expected to win a Dec. 16
election, called for aggressive policy action from the Bank of
Japan, including embarking on "unlimited easing".
    Exporters have benefited the most, but lately investors
started to take some profits on them. Among those which
succumbed to profit-taking on Tuesday were Honda Motor Co
, Nissan Motor Co, Sony Corp and
Daikin Industries, down between 0.7 and 1.5 percent. 
    "We probably need a bit of pull back before it can take the
next leg higher," said a Tokyo-based analyst, who declined to be
identified. "We probably hold 9,000 ... The volume is getting
pretty thin in the run-up to the year end."
    According to Reuters data, Tuesday's most-traded Nikkei
index was a put with a strike price of 9,250, a
2.9 percent downside from the current closing level, and a
December maturity.
    The next most-traded was a December call at 9,750
, followed by another December put at 9,500
. 
    But some market participants said investors, who have missed
the rally, may be forced to go long, which will help support the
market.
    "Some funds which invest in Asian funds have failed to chase
the market higher over the past month as the market started
rising too fast ... they could not make a quick investment
decision," said Kenichi Hirano, a strategist at Tachibana
Securities.
    "Now they are trying to catch up with the rises and add more
long positions on Japanese stocks when they fall."
    Boosted by the rally in the past month, the Nikkei is up
12.7 percent this year, in line with the U.S. S&P 500 but
lagging a 14.3 percent rise in the pan-European STOXX Europe 600
.
    The broader Topix index eased 0.3 percent to 786.07
in light trade on Tuesday, with 1.54 billion shares changing
hands, down from Monday's 1.94 billion and last week's daily
average of 1.91 billion.           
    Fuji Heavy Industries Ltd lost 1.8 percent after
J.P. Morgan downgraded the Subaru-brand carmaker to 'neutral'
from 'overweight', but rival Suzuki Motor Corp climbed
4.1 percent after Deutsche Bank lifted its price target on the
automaker.
    Power utilities suffered on news that Japan Atomic Power Co,
in which the firms hold a stake, may have to decommission one of
its reactors after seismologists concluded the plant in western
Japan is sitting over an active faultline. 
    Kansai Electric Power Co, Chubu Electric Power Co
, Hokuriku Electric Power Co and Tokyo Electric
Power Co shed between 1.4 and 4.4 percent.
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