Nikkei hits 7-1/2 mth high on tech shares, gains may be fleeting

Tue Dec 11, 2012 8:15pm EST

* Chip shares gain on rising semiconductor index
    * Nikkei back to 'overbought' territory
    * Gains may be short-lived before Sunday election - trader
    * Correction expected after election - trader

    TOKYO, Dec 12 (Reuters) - Japan's Nikkei share average rose
on Wednesday, hitting a 7-1/2 month high led by gains in tech
shares which lifted Wall Street, but gains may be trimmed in
late trade as investors are likely to lock in profits before
Sunday's election.
     The Nikkei rose 0.6 percent at 9,583.60 after
opening at 9,606.25, the highest level since April 27.
    The index appeared unmoved by news North Korea had launched
a long-range rocket after reports the flight had been delayed.  
    Chip-related shares outperformed the market after
Philadelphia Semiconductor Index, or Soxx, rose 1.9
percent overnight, lifting confidence in the sector. Advantest
Corp gained 1.7 percent, Nikon Corp jumped 4.1
percent and Canon Inc added 2.8 percent.
    But traders said that the rises may be short-term as the
current market level is back to 'overbought' territory, noting 
that investors may not take large positions before the lower
house election on Sunday.
    "Investors are buying as sentiment is positive after Wall
Street rose on tech shares, but today's buying is not a serious
bet," said Mitsushige Akino, a fund manager at Ichiyoshi Asset
Management. "They may lock in short-term profits, and the Nikkei
may be level with yesterday's close at the end of the day."
    The index's 14-day relative strength index stood at 70.69,
while a level of 70 indicates that the market is overbought and
it often signals a possible near-term pullback.
    The benchmark has risen 10.6 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".
    Market players said that the market may see some correction
after the election as hopes for easy policy are already priced
in to the current market.
    "Investors who wasted no time chasing the market higher as
soon as the yen started weakening will likely unwind their
positions soon," said Makoto Kikuchi, the chief executive of
Myojo Asset Management. "They probably will just 'eat in
moderation', instead of trying to 'full their stomachs.'"
    Meanwhile, analysts noted that volume may stay light as
investors keep an eye on the outcome of a two-day policy-setting
meeting of the U.S. Federal Reserve which started on Tuesday.
The Fed is expected to announce a new round of Treasury bond
purchases when the meeting ends on Wednesday to replace its
"Operation Twist" stimulus, which expires at the end of the
year. 
    Other exporters advanced on the back of a weak yen, with
Honda Motor Co gaining 1.3 percent and Nissan Motor Co
 adding 1.2 percent as a weak yen lifts their overseas
earnings when repatriated.
    The dollar last traded at 82.54 yen, a touch down
from its 7-1/2-month low of 82.84 touched on Nov. 22. The
Japanese currency has been pressured by expectations for more
easing from the Bank of Japan, which meets next week.
   The broader Topix index added 0.7 percent to 791.69.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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