Nikkei up 1.2 pct, regains semblance of stability as volatility ebbs

Tue May 28, 2013 3:11am EDT

* Nikkei reverses early losses to end 1.2 pct higher
    * Big name exporters rebound as yen drops
    * Volatility eases somewhat
    * Foreign investors bullish about Japanese equities' outlook
- Nomura

    By Ayai Tomisawa
    TOKYO, May 28 (Reuters) - Japan's Nikkei share average rose
on Tuesday, with investors picking up recently battered stocks
as the market regained a degree of stability after the extreme
volatility of the past few days. 
    The Nikkei gained 169.33 points to 14,311.98, after
dropping as much as 1.4 percent to below 14,000 at the open
which came on top of Monday's 3.2 percent slump.
    Market participants said the turbulence caused by high
frequency programme trade on futures seemed to be over, but
sentiment remained fragile after last week's dive raised doubts
about the sustainability of the remarkable bull-run that has
taken the index to a 5-1/2-year high.
    The Nikkei plunged 7.3 percent last Thursday, its biggest
single-day percentage loss since the March 2011 earthquake and
tsunami. The selloff was triggered by worries the U.S. Federal
Reserve will scale back its stimulus this year and weak factory
activity data from China, Japan's second-biggest export market.
    The index lost 3.5 percent last week, the biggest weekly
decline since October.
    Still, investor appetite for Japanese equities remained
intact, underpinned by sweeping government and central bank
efforts to pull the world's third-largest economy from its
two-decade long funk, analysts said.
    "Japanese stocks' fundamentals have not changed, and
sentiment in the long-term on Abenomics is intact," said Naoki
Fujiwara, a fund manager at Shinkin Asset Management. 
    Even after the recent selloff, the benchmark Nikkei is up 38
percent this year, and has gained more than 15 percent since
April 4, when the Bank of Japan announced a sweeping monetary
expansion campaign to beat back years of deflation and revive
growth.
    The broader Topix index added 1.2 percent to
1,168.27.
    The recent gyrations in the market were exacerbated by a
rebound in the yen in the past few sessions, driven by
safe-haven bids and as some investors pared back their
yen-selling positions to cover losses in equities.   
    On Tuesday, the yen pulled back, with the dollar rising 1.0
percent to 101.95 yen, up more than a full yen from two-a
week low of 100.66 hit on Friday. The yen's drop helped some of
the exporters.
     Blue-chip Toyota Motor Corp advanced 4.9 percent
and was the second-most traded on the main board by turnover,
while peers Mazda Motor Corp rose 6.5 percent and
Mitsubishi Motors Corp jumped 14 percent.
    Sony Corp, which was also heavily traded, gained
3.2 percent.
    Industrials also outperformed. Toshiba Machine Co 
gained 5.1 percent, SMC Corp added 4.3 percent and Mori
Seiki Co advanced 7.8 percent.
    Hiromichi Tamura, chief strategist at Nomura Securities,
said that most of the institutional investors his team met in 
Europe and the United States last week were bullish about the
outlook for Japanese equities, compared with the previous time
the team met in January.
    "Most of the investors we met in January were bearish on the
outlook. This time, several investors we met thought our
forecast for the Nikkei to reach 16,000 by end-2013 was overly
conservative," Tamura wrote in the note.