Nikkei closes at 52-month high, exporters surge; BOJ gov appointment eyed

Wed Feb 20, 2013 2:07am EST

* Resistance seen at 11,500 - analysts
    * Japan Tobacco sinks, sources say govt to launch share sale
soon
    * Abe's U.S. visit, nomination of BOJ governor main upcoming
events

    By Ayai Tomisawa
    TOKYO, Feb 20 (Reuters) - Japan's Nikkei average climbed to
a 52-month high on Wednesday as exporters were buoyed by the
yen's recent weakness, but analysts expect the upside could be
limited in the short run as investors focus on who will become
the next Bank of Japan governor.
    The Nikkei rose 0.8 percent to 11,468.28, marking
its highest closing level since late September 2008. The
benchmark index 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.
    Toyota Motor Corp rose 1.7 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 most traded stock by turnover on the
main board.
    Other exporters were also in demand, with Toshiba Corp
 adding 1.9 percent and Canon Inc gaining 1.5
percent.
     The dollar last still traded at 93.55 yen, but not
far from a 33-month high of 94.465 yen set on Feb. 11. The yen
has declined some 15 percent against the dollar since November,
driven by bold expansionary policies pursued by Abe to reignite
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.
     Analysts said the Nikkei is likely to trade in a range for
the rest of the week while investors carefully await the outcome
of Friday's Washington summit, where Abe meets U.S. President
Barack Obama to discuss a range of issues including bilateral,
regional and global issues, as well as economic and trade
matters.
    "The yen weakness has steadied and the stock market has hit
the resistance level of 11,500. Investors will probably take a
wait-and-see stance before those key events," said Hajime
Nakajima, deputy general manager at Iwai Cosmo Securities.
"Short-term investors may trade on individual news, but we need
more promising cues to attract long-term investors to the
Japanese market."
     Most investors are also likely to be circumspect about
pouring more money into stocks as they focus on whom the
government will nominate as the next central bank governor next
week, the analysts said.
    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 broader Topix added 1.1 percent to 973.70 in
thin trade, with 2.82 billion shares changing hands, compared
with last week's average daily volume of 4.03 billion shares.
    Wednesday's market gains were partly capped by Japan Tobacco
Inc ending down 1.0 percent, after falling as much as
5.9 percent as 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. 
    Ebara Corp dived 7.6 percent after the manufacturer
of pumps and air blowers said it would raise up to 35.1 billion
yen ($375 million) through a public offering of common shares
and convertible bond (CB) issuance, stoking fears of dilution.
    Hiroichi Nishi, an assistant general manager at SMBC Nikko
Securities, said that there were more than 40,000 call option
orders at the 11,500 mark as of Tuesday, suggesting that the
index faces some resistance from the seller side close to that
level.
    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 senior trader at the foreign bank said 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.