Nikkei posts modest gain as yen falters, profit taking caps rally

Thu Mar 7, 2013 2:48am EST

* Exporters lead gains as dollar hits 1-week high vs yen
    * Tyre makers up on broker upgrade
    * Market focus shifts to new BOJ leadership

    By Tomo Uetake
    TOKYO, March 7 (Reuters) - Japan's Nikkei average rose to a
4-1/2-year high for a second day in a row on Thursday, boosted
by expectations of more aggressive monetary policy, though the
index failed to close above the key 12,000-mark.
    The Nikkei ended 0.3 percent higher at 11,968.08
points, extending its winning streak to six straight sessions,
after climbing as high as 12,069.60 earlier in the day.
    The benchmark succumbed to profit taking after topping the
psychologically important 12,000-level, with shares in banks,
and warehouse and wharf operators going into reverse.
    "It is absolutely normal for investors to lock in gains amid
a sense of achievement after hitting 12,000," said Fumiyuki
Nakanishi, general manager of investment and research at SMBC
Friend Securities. 
    "Our traders said there were many sell orders from our
clients, who are medium to small institutional investors, but no
major buy orders today in the spot market," he said.
    The Bank of Japan kept monetary policy unchanged, as
expected, earlier on Thursday, holding fire for new leaders who
are expected adopt bolder measures to end nearly 20 years of
mild deflation from next month. 
    The two-day meeting was the last for Governor Masaaki
Shirakawa and his two deputies before they leave on March 19.   
    
    Exporters led early gains as the dollar hit a one-week high
against the yen after a report showed U.S. private-sector
employers added a larger-than-expected 198,000 jobs in February.
    Mazda Motor Corp climbed 4.6 percent, Suzuki Motor
 rose 1.6 percent and auto parts maker Denso Corp
 gained 1 percent.
    "Exporters have gained sharply recently and they have become
expensive," said Tetsuro Ii, the chief executive of Commons
Asset Management, noting that foreign investors were main buyers
of exporter shares.
    But he added that higher valuations would likely be
justified as earnings recover on the back of a weaker yen. 
    The rubber products sub-index was the
best-performing sector on the main board on Thursday, up 3.5
percent, after Citigroup upgraded its rating of the three major
tyre makers to 'buy'.
    Bridgestone Corp surged 4.2 percent, while Sumitomo
Rubber Industries Ltd and Yokohama Rubber Co Ltd
 advanced 2.2 percent and 1.4 percent, respectively. 
    Trading volume on the main board was moderate, with 3.19
billion shares changing hands, compared with last week's daily
average of 3.32 billion.
    The broader Topix edged up 0.1 percent to 1,004.35,
its highest since October 2008.
        
    WEAK YEN POWERS EXPORTERS
    "Our investment view on Japanese equities remains neutral
and we still prefer the exporter companies mainly because we
believe the weaker yen will bring a positive impact to their
earnings for the quarter ending March," Toru Ibayashi, head of
wealth management research of UBS Securities Japan, wrote in a
note.
    The Nikkei has gained 15 percent this year, outperforming
its global peers as the yen had declined sharply on calls by new
Prime Minister Shinzo Abe for aggressive easing.
    By comparison, the U.S. S&P 500 has gained 8.1
percent while the pan-European FTSEurofirst 300 index 
has advanced 4.6 percent over the same period.
    While long-term sentiment toward Japanese stocks remains
positive, analysts also said that a near-term correction was
possible.
    "As soon as the Nikkei trades 5 percent above its 25-day
moving average, we see selling immediately," said Kenichi
Hirano, strategist at Tachibana Securities. 
    The 25-day moving average is at about 11,415, 4.6 percent
below Thursday's closing level.   
    Other notable movers on Thursday included Boeing 
Dreamliner's battery maker, GS Yuasa Corp, which surged
8.9 percent after reports said U.S. safety regulators are poised
to approve within days a plan to allow Boeing to begin flight
tests of the now-grounded passenger jet with a fix for its
fire-prone batteries. 
    Sharp Corp, however, sank 7.9 percent, giving up
some of the gains it made a day earlier after sources said South
Korea's Samsung Electronics Co Ltd is set to invest
about $110 million in the struggling firm. The companies
confirmed the investment after Wednesday's market close.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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