Nikkei hits fresh 5-1/2-year high on BOJ optimism, Sony soars

Wed May 22, 2013 2:49am EDT

* BOJ's view on economy outlook spur buying in futures
    * Volume highest since April 5
    * Sony jumps on report of assessing spin-off proposal

    By Ayai Tomisawa
    TOKYO, May 22 (Reuters) - The Nikkei average climbed 1.6
percent to a fresh 5-1/2-year high on Wednesday, spurred on by
the Bank of Japan's optimism about the economic outlook, while
Sony Corp surged on reports it may consider a proposal to spin
off its entertainment assets.
    As widely expected, the Bank of Japan kept policy steady
earlier in the day, and maintained its pledge to increase base
money, or cash and deposits at the central bank, at an annual
pace of 60 trillion to 70 trillion yen ($585-$682 billion).    
    It upgraded its assessment of the economy, saying it "has
started picking up," as Prime Minister Shinzo Abe's programme of
aggressive fiscal and monetary stimulus has boosted sentiment
and a weaker yen has halted a decline in exports.
 
    The Nikkei added 246.24 points to 15,627.26, the
highest closing level since December 2007. It rose as high as
15,706.63 earlier, also the best mark since the same time.
    "Investors bought Nikkei futures as well as cash stocks with
large market caps," said Naoki Fujiwara, a fund manager at
Shinkin Asset Management. "The market has confirmed the central
bank's stance to keep its aggressive monetary easing going."
   The market started off on a strong footing after two senior
Federal Reserve officials dampened speculation that the U.S.
central bank might start tapering its stimulus programme this
year. 
    "Global funds, which are picking up global cyclical shares
in the U.S. market, are buying more such shares in the Japanese
market," said Hikaru Sato, a senior technical analyst at Daiwa
Securities.
    Exporters attracted buying, with Panasonic Corp 
rising 2.0 percent and TDK Corp gaining 2.8 percent.
    A senior trader at a foreign bank said that there is still a
structural underweight in Japanese equities, and he estimated
that global investors would plough about $100 billion into
Japanese equities to switch their position to neutral from
underweight.
    According to the Ministry of Finance, foreign investors have
invested a total of 7.57 trillion yen ($74 billion) into
Japanese stocks since the end of 2012.
    The broader Topix gained 0.4 percent to 1,276.03 in
active trade, with 6.38 billion shares changing hands, the
highest since April 5. It compares with last month's average
daily volume of 4.31 billion shares.
    
    SONY IN PLAY
    Sony Corp 6758.T> jumped 5.9 percent after the Nikkei
newspaper said the company is considering evaluating a proposal
from top shareholder Third Point LLC, controlled by Californian
billionaire Daniel Loeb, to spin off its movie and music
business. It was the third-most traded stock on
the main board by turnover.
    The stock has surged nearly 139 percent so far this year,
outpacing the broader market, although it now carries a 12-month
forward price-to-earnings ratio of 35, more than double the 15.9
average for Japanese equities, according to Thomson Reuters
Datastream.
    The benchmark Nikkei has rallied about 50 percent this year,
and it has soared nearly 10 percent since May 9, when the dollar
broke above the 100-yen mark.
    "Japan is rapidly becoming a big momentum trade and thus
liable to volatility; trading a momentum market has to be a case
of trying to stay long quality rather than chasing beta," Mark
Tinker, manager at AXA Framlington Global Opportunities Fund,
wrote in a note.
    "The near term risks we see are largely associated with the
current behaviour of the Japanese government bond market."
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