Nikkei seen rising on back of Wall Street gains

Tue Feb 19, 2013 6:15pm EST

TOKYO, Feb 20 (Reuters) - Japan's Nikkei average is expected
to open higher on Wednesday as Wall Street shares edged up to
near record highs, although gains are likely to be capped with
investors focusing on who will become the next Bank of Japan
governor.
    The Nikkei is likely to trade between 11,300 and
11,450, strategists said. Nikkei futures in Chicago 
closed at 11,425 on Tuesday, up 0.5 percent from the Osaka
 close of 11,370.
    "There was concerned that the Dow industrial average would
struggle before 14,000 but yesterday it broke above 14,000 ...
This is a positive factor for the Japanese market," said Takashi
Hiroki, chief strategist at Monex Inc.
    U.S. stocks rose overnight as this year's ongoing surge in
merger activity suggested investors were still finding value in
the market even as indexes closed in on all-time highs.
    But Hiroki said investors were unlikely to chase the Tokyo
market too hard as they would be focused on whom the government
will nominate as the next central bank governor next week.
    The government has delayed nominating a governor by a week,
fanning talk of friction between the prime minister and the
finance minister over who should run the central bank and take
aggressive action to revive the economy.
    The Nikkei slipped 0.3 percent to 11,372.34 on Tuesday,
while the broader Topix index added 0.1 percent to
963.61.
    Societe Generale said the most-traded Nikkei index option
expiring in March was a call at 12,500, up nearly 10 percent
from where the index closed on Tuesday. The next most-traded was
another call at 12,250, followed by a put at 10,500 and another
call at 12,000.
    The benchmark Nikkei is up 9.4 percent since the start of
this year, spurred by the yen's weakness, after rallying 22.9
percent in 2012. Most of the gains last year came in the final
six weeks after Prime Minister Shinzo Abe called for the BOJ to
adopt bolder monetary policy in his election campaign.
    Japanese equities carry a 12-month forward price-to-earnings
ratio of 13.8, a level not seen since March 2011, according to
Thomson Reuters Datastream. That compared with a 10-year average
of 16.4.
            
> M&A deals lift Wall Street shares nearer a record high    
> Yen climbs broadly after Japan finmin's comments        
> U.S. bond prices fall as stock gains pare bids           
> Gold drops near 6-month low on economic optimism        
> Oil rises, following U.S. equities higher                

    STOCKS TO WATCH
    --JAPAN TOBACCO INC 
    The Japanese government's sale of a $10 billion stake in
Japan Tobacco, the world's third-largest tobacco company, is
expected to kick off within days after bankers met on Tuesday
over deal details, sources close to the deal told Reuters.
 
    --ORIX CORP 
    The Japanese financial services firm said on Tuesday it has
agreed to buy Dutch asset manager Robeco from its owner Rabobank
for 1.94 billion euros ($2.6 billion) in a cash and stock deal.
 
    --TOYOTA MOTOR CORP 
    Toyota Motor will ramp up production in Japan in April by
about 10 percent on higher-than-expected domestic sales and
increased profitability of exports due to a weaker yen, the
Nikkei reported.
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