Nikkei hits 52-month high, but Japan Tobacco weighs

Tue Feb 19, 2013 10:40pm EST

* Orix, Toyota advance
    * Japan Tobacco sinks, sources say govt to launch share sale
soon
    * Nikkei rises 0.7 pct, Topix adds 0.8 pct

    By Tomo Uetake
    TOKYO, Feb 20 (Reuters) - Japan's Nikkei average climbed to
a 52-month high on Wednesday, buoyed by gains on Wall Street and
a softer yen, though analysts said the upside could be limited
as investors focus on who will become the next Bank of Japan
governor.
    The Nikkei advanced 0.7 percent to 11,451.33 after
trading as much as 11,510.52 earlier, its highest level since
October 2008.
    Toyota Motor Corp rose 1.9 percent after the Nikkei
newspaper said the carmaker 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.
 It was the third-most-traded stock by turnover
on the main board.
    Capping the market's gains, Japan Tobacco Inc sank
3.2 percent as the top-weighted loser after sources told Reuters
that the Japanese government's $10 billion stake in the world's
third-largest tobacco company was expected to kick off within
days after bankers met on Tuesday over deal details.
 
    The benchmark Nikkei is up 10 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 focused his election
campaign on lobbying the BOJ to adopt bolder monetary policy.
     Takashi Hiroki, chief strategist at Monex Inc, 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.  
    "Lawmakers in Japan have made it very clear that they are
comfortable with the yen at 90 to 100 (to the dollar). They
probably prefer closer to 100 than 90. They would like the
equity market to go higher in the fiscal year end (in March)," a
senior trader at a foreign bank said.
    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.
    The trader said the long-only investors, such as pension
funds, remained slow to enter the Japanese market.
    "I don't think U.S. long-only funds have really got into
this market. They are still underweight. I think it's hedge
funds and regional accounts that have a little bit more
flexibility around their asset allocations, so we are seeing
those guys in the market," the trader said.
    The broader Topix index rose 0.8 percent to 971.66
after trading as high as 1.3 percent.
    Social gaming company Gree Inc tumbled as much as
7.6 percent after mobile phone operator KDDI Corp said
in a filing that it plans to sell 3.4 percent of Gree's
outstanding shares.
    But Orix Corp gained 2.8 percent after the
financial services firm said it has agreed to buy Dutch asset
manager Robeco from its owner Rabobank in its biggest-
ever acquisition. 
    "As of Tuesday, there were more than 40,000 call option
orders at 11,500. So when the Nikkei 225 approaches that level,
people think the index could face some resistance from the
seller side. That adds pressures on the index," said Hiroichi
Nishi, an assistant general manager at SMBC Nikko Securities.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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