Nikkei to test 9-mth high; profit-taking possible in late trade

Thu Dec 20, 2012 6:43pm EST

TOKYO, Dec 21 (Reuters) - Japan's Nikkei share average is
likely to rise on Friday and test a nine-month high after Wall
Street stocks rose on hopes for progress in U.S. fiscal talks,
with exporters expected to gain on a weaker yen.
    The Nikkei is expected to trade between 10,050 and 10,200 on
Friday, but most of the gains may come in early trade with
profit-taking expected in the afternoon before a three-day
weekend, market participants said. Japanese financial markets
are closed on Monday for a national holiday.
    Nikkei futures in Chicago closed at 10,170, up from
the close in Osaka of 10,030.
    "Although the market is overheated, more buying is expected
as the yen is seen staying low even after the BOJ's steps have
already been priced into the market," said Hiroichi Nishi,
general manager at SMBC Nikko Securities.
    If the Nikkei reaches the 10,200-mark, it will be the first
time since March 27. 
    On Thursday, the Nikkei dropped 1.2 percent to
10,039.33.
    Despite Thursday's fall, the Nikkei was still deep in
"overbought" territory, with its 14-day relative strength index
at 75.67, well above 70 which is deemed overbought and
signalling that a correction may be imminent.
    The yen stayed under pressure after the Bank of Japan
expanded its asset-buying programme by an expected 10 trillion
yen and signalled more action ahead including setting a higher
inflation target.
    The dollar was at 84.36 yen, still within easy reach
of a 20-month peak around 84.62 set earlier in the week. A weak
yen inflates exporters' overseas earnings when repatriated.
    "Investors may chase the market higher by buying both
exporters and financials on the back of ongoing hopes for
(incoming premier Shinzo) Abe's reflationary policy," said
Yutaka Miura, a senior technical analyst at Mizuho Securities.
But he added that with a lack of trading cues, the market may
succumb to profit-taking in the coming days, which may drag the
Nikkei down near 10,000.
    "U.S. stocks rise and fall merely based on daily
developments of U.S. budget talks ... Japanese stocks tend to
follow Wall Street's performance, but the market is fed up with
the same thing over and over so investors may just take profits
to adjust their positions."
    Market observers said talks to avoid the so-called fiscal
cliff of government spending cuts and tax hikes in the United
States remained a key risk for markets in the closing days of
the year.
    In the United States, Republican House Speaker John Boehner
said he would keep working on a solution to the fiscal cliff
while also slamming President Barack Obama's approach to budget
talks.
    The broader Topix fell 0.1 percent to 838.61 in
active trade on Thursday, with 3.74 billion shares changing
hands on the main board.
    
> Wall St bounces back on hope for 'cliff' solution        
> Euro edges up on dollar, whipsawed by 'fiscal cliff'   
> Bond prices nudge higher on U.S. fiscal muddle          
> Gold below $1,650/oz, down 1.1 pct on fund selling     
> Crude futures end mixed as budget deal stalls           
    STOCKS TO WATCH
    --Lawson Inc 
    Lawson is expected to report an operating profit of slightly
above 53 billion yen for the nine months ended in November, up 6
percent on the year and marking a sixth straight year of record
profit for the three-quarter period, the Nikkei business daily
reported.
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