Japan's Nikkei climbs on weaker yen, strong China data

Wed Jan 9, 2013 10:36pm EST

* Nikkei rises 0.9 pct, Topix gains 1.4 pct
    * Isuzu jumps on possible GM joint development
    * Stocks benefitting from Abe's policies gain

    By Tomo Uetake
    TOKYO, Jan 10 (Reuters) - Japan's Nikkei average rose on
Thursday as renewed weakness in the yen bolstered shares of
exporters, while data showing China's exports growth rebounded
more sharply than expected in December from a three-month low
also lifted sentiment. 
    The Nikkei climbed 0.9 percent to 10,677.74 by the
midday break, taking the index deep into "overbought" territory.
Its 14-day relative strength index stood at 76.3, above the
70-mark which is deemed overbought and often indicates the
market is ripe for a correction in the near term.
    The Nikkei China 50 index, comprised of companies
with significant exposure to the world's second-largest economy,
gained 1.5 percent as China's exports expanded at their fastest
pace in seven months in December.   
    Shares of exporters, which have suffered from a strong yen
and competition from South Korean companies, have been boosted
by the yen's depreciation in the past two months. 
    The currency has been weakening since Shinzo Abe, the new
prime minister, called on the Bank of Japan to adopt a bolder
policy to revitalise the economy, including setting an inflation
target of 2 percent. During that period, the Nikkei has rallied
23.3 percent.
    A senior trader at a foreign bank said some people remained
sceptical of the rally, and many were buying derivatives instead
of taking big positions in stocks.
    "It's sort of a slow burn but I actually prefer this. It's a
much nicer rally where you have this 50, 60 basis points move
higher than this crazy 3 percent, 4 percent day when we squeeze
higher," he said. "It's a much higher quality rally because it
gives people time to work and think of what they want to do."
    The trader said many investors were looking at call options
with a strike price of 11,000, some 3.3 percent above the
Nikkei's current level.
    Among exporters, Toyota Motor Corp, Honda Motor Co
, Daikin Industries and Nikon Corp 
rose between 1.2 and 4.3 percent.
    The yen was down 0.2 percent at 88.06 to the dollar
on Thursday after falling 1 percent in the previous session.
    Isuzu Motors Ltd climbed 4 percent, outpacing other
automakers after General Motors Co said it and Isuzu
would discuss the possibility of jointly developing a
next-generation pickup truck. 
    The broader Topix index gained 1.4 percent to 891.73
in active trade, with volume 15 percent above its full daily
average for the past 90 trading days.
    
    FOREIGN NET BUY IN 8TH WEEK
    A change in sentiment towards Japan after Abe's call has
perked up foreign investors' interest in Japanese equities.
Foreign investors bought a net 178.9 billion yen ($2 billion)
worth of shares in the week ended Jan. 5, the eighth consecutive
week of net purchases, Ministry of Finance data showed.
    Stocks expected to be benefitting from Abe's policies, such
as education providers and housing sellers, were in demand.
    The Nikkei newspaper has reported that the new prime
minister plans to make certain gift money for grandchildren's
education tax-exempt and to provide cash benefits to eligible
home buyers.
    Tokyo Individualized Educational Institute jumped
9.6 percent, while homebuilder SxL Corp and Sanei
Architecture planning were up 4.4 and 4.7 percent,
respectively.
    BNP Paribas, however, recommended that investors book
profits before the central bank's policy meeting on Jan. 21 and
22, saying gains were likely to be limited in the short term.
    "We are expecting the short-term upside to be limited: those
with exposure can implement an overlay by staying long and
selling an out of the money call as a yield enhancement
strategy; those without exposure can buy a call spread when the
market consolidates; and we would not object to investors who
want to unwind part of the positions in order to lock in
profits," the bank said in a research note.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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