Nikkei hits highest close in nearly 5 yrs as yen softens after G20

Mon Apr 22, 2013 2:52am EDT

* Exporters lead gainers as yen nears 100-mark to dollar
    * Mitsui Eng jumps 13.6 pct on report of merger talks
Kawasaki Heavy
    * SG: most traded Nikkei stock options is a May call at
14,500

    By Dominic Lau
    TOKYO, April 22 (Reuters) - The Nikkei average climbed 1.9
percent to its highest close in almost five years on Monday, as
the yen weakened after the Group of 20 leading economies stopped
short of criticising Japan's  expansionary monetary policies.
    Major exporters charged higher as the dollar firmed against
the yen to within a whisker of 100 after the G20 simply said in
a communique after a two-day meeting it would be "mindful" of
possible side effects from extended periods of monetary
stimulus.
    "I had been worried that the G20 countries would criticise
Japan's easing of monetary policies," said Ryota Sakagami, chief
strategist at SMBC Nikko Securities.
    "The market uptrend will continue ... I think sooner or
later the Nikkei will reach 14,000. For the moment, the one
concern is still the weak global economy, especially the weak
U.S. macro economic indicators."
    The Nikkei ended up 251.89 points at 13,568.37, its
highest closing level since July 2008.
    Sakagami said domestic-focused companies were likely to
outperform exporters in the next few months, although the yen's
weakness lifted the appeal of export-driven firms on Monday.    
    Honda Motor Co, Mazda Motor Corp, Canon
Inc and Olympus Corp were up between 1.7 and
5.9 percent.
    Electronic component maker TDK Corp rose 2.9
percent. According to data provider Markit, the stock was the
most shorted Asian firm with 14.7 percent of its shares out on
loan.
    
    BANKING ON REFLATION
    The Bank of Japan on April 4 stunned financial markets by
announcing a sweeping monetary expansion programme aimed at
ending two decades of stagnation, promising to inject $1.4
trillion into the world's third-largest economy in less than two
years.
    Financials, which are expected to benefit from the
reflationary drive, were also in demand on Monday, with Nomura
Holdings, Japan's top brokerage, up 2.4 percent and
Mizuho Financial Group adding 1.9 percent.
    But real estate companies, which have also 
benefited from reflationary hopes, slipped 0.2 percent.
    The real estate sector has surged 110 percent since
mid-November when Japan's current prime minister began promising
 bold monetary and fiscal policies during his election campaign,
outpacing a 56.7 percent rise in the Nikkei during the same
period. 
    The broader Topix index advanced 1.7 percent to
1,145.60, with volume hitting a one-week high as 4.42 billion
shares changed hands.
    Other notable gainers included Mitsui Engineering &
Shipbuilding Co Ltd, jumping 13 percent after the
Nikkei newspaper said the shipbuilder and heavy electric
machinery maker and Kawasaki Heavy Industries Ltd were
set to begin merger talks. Shares of Kawasaki Heavy eased 0.9
percent. 
    
    14,000 AND BEYOND
    "What the market is looking now is for the earnings results
and earnings guidance from companies. My view is that the market
will refocus ... that weak yen does help a lot," said Hidehiro
Tomioka, head of equity investment at Manulife Asset Management.
    "Companies will likely base their budget on 90 yen to the
dollar. The market will easily calculate the 10 yen difference
and will realise that the earnings growth is very big for the
fiscal year ending next March. That will be the driver."
    Tomioka said he was expecting the Nikkei to reach 16,000 to
17,000 by the end of 2013, 18 to 25 percent above where the
index ended on Monday.
    Societe Generale said the most traded Nikkei index stock
option on Monday was a call with a strike price of 14,500 and
with a May expiry.
    The next-most traded was a put at 12,500, followed by
another call at 15,000 and another put at 12,750. They all had a
May expiry.
    In terms of valuations, Japanese equities carry a 12-month
forward price-to-earnings ratio of 14.7, a level not seen since
June 2010 but still below its 10-year average of 16.4, according
to Thomson Reuters Datastream.
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