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

Tue Dec 11, 2012 10:05pm EST

* North Korea rocket launch has no impact - analyst
    * Chip shares gain on rising semiconductor index
    * Nikkei back to 'overbought' territory
    * Gains may be short-lived before Sunday 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.
     By the midday break, the Nikkei rose 0.5 percent at
9,570.08 after opening at 9,606.25, the highest level since
April 27.
    The index was unmoved by news North Korea had launched a
long-range rocket in defiance of international sanctions.
 
    "Since there have been reports on North Korea's rocket
launch plan lately and there seems to be no damage seen, the
market seems to have dismissed the news," said Hiroichi Nishi,
general manager at SMBC Nikko Securities.
    Chip-related shares outperformed the market after the
Philadelphia Semiconductor Index, or Soxx, rose 1.9
percent overnight, lifting confidence in the sector. Advantest
Corp gained 2.8 percent, Nikon Corp jumped 3.5
percent and Canon Inc added 2.3 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 a 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 70.43. A
level of 70 indicates that the market is overbought and it often
signals a possible near-term pullback.
    The benchmark has risen 10.5 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 the election,
called for aggressive policy action from the Bank of 
Japan, including embarking on "unlimited easing".
    
    EASY POLICY PRICED IN
    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.'"
    Volume is expected to 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 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 1.4 percent and Nissan Motor Co
 adding 0.9 percent as a weak yen lifts their overseas
earnings when repatriated.
    The dollar last traded at 82.56 yen, a touch down
from its 7-1/2-month low of 82.84 reached 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 0.5 percent to 790.26.
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