Nikkei rises but still marks 4th straight week of loss

Fri Jun 14, 2013 2:46am EDT

* Nikkei rises 1.9 pct, Topix up 1.2 pct in active trade
    * Nikkei posts 4th straight weekly loss
    * Still holds below Ichimoku cloud in bearish sign
    * Volatility remains elevated

    By Dominic Lau
    TOKYO, June 14 (Reuters) - Japan's Nikkei average climbed
1.9 percent on Friday, rebounding from a slump in the previous
session, as robust data eased concerns over whether the U.S.
economy can withstand a pullback in stimulus by the Federal
Reserve.
    "People are unwinding (short) positions, or people are
trying to buy on dips. The market did rebound and the U.S. did
well so people are buying on the back of that," a senior dealer
at a foreign bank said.
    U.S. stocks rallied overnight after retail sales rose more
than expected in May and first-time applications for
unemployment benefits fell last week - signs of economic
resilience. 
    The senior dealer said buy orders outpaced sell orders by
three to one and there was a good balance between long-only
investors and hedge funds, although long-only players were a bit
more active.
    "For the time being, the Nikkei is trying to find itself
where it should be after the crazy opening," he said, referring
to Nikkei June futures and options contracts settlement, known
as "special quotation".
    The Nikkei ended up 241.14 points at 12,686.52 after
trading as high as 12,900.65, though it was still holding below
the Ichimoku cloud in a bearish sign. For the week, it was down
1.5 percent, marking its fourth straight weekly loss, its
longest such losing streak since October.
    The Osaka Securities Exchange said after the close that
Nikkei futures and options contracts for June settled at
12,668.04.    
    
    BEAR MARKET
    On Thursday, the Nikkei tumbled 6.4 percent to its lowest
close since April 3, the day before the Bank of Japan unveiled
sweeping stimulus to revive the economy, and below the Ichimoku
cloud for the first time since mid-November. It also took the
slide from a 5-1/2-year peak hit on May 23 to nearly 22 percent,
slumping into a bear market and wiping about $700 billion off
the Nikkei's market capitalisation.
    Over the past three weeks, trading in the Nikkei has been
volatile. The 30-day implied volatility for the benchmark jumped
to 42.3 percent on Thursday, its highest since the March 2011
earthquake and tsunami, according to Thomson Reuters Datastream.
 
    Investors, mainly hedge funds, have been cutting their long
Japanese equities and short yen positions on concerns that the
Fed will roll back its stimulus and after the Nikkei had rallied
more than 80 percent from mid-November to that multi-year high.
    Tsukasa Shimoda, the founder and president of Galleyla
Investment, said he was cautious in the short-term but the
recent sell-off offered good opportunity in the medium-term.
    "If I see a better chance, I will increase the net
positions," said Shimoda, whose hedge fund has a size of $10
million.
    The broader Topix index advanced 1.2 percent to
1,056.45 in active trade on Friday, with trading volume hitting
a one-week high of 3.77 billion shares.
    Beaten-down real estate companies were in demand,
up 4.4 percent, while exporter Toshiba Corp gained 2.9
percent.
    Nomura Securities was bullish, lifting its Nikkei year-end
target to 18,000 from 16,000, despite the recent sell-off.
    "We do not brush off the recent stock market turmoil
lightly. Indeed, we see it as significant because it constitutes
a challenge to Abenomics," it said in a note.
    "If share prices fall back to where they were before the BOJ
announced its new phase of monetary easing, this could prompt
market observers to pronounce Abenomics a failure." 
    The sell-off has taken Japanese equities' valuations,
measured by the 12-month forward price-to-earnings, to 14.1 from
a three-year high of 16.3 touched two weeks ago, Datastream
showed.