Nikkei gains 2.7 pct, climbs out of bear market; wary before Fed outcome

Mon Jun 17, 2013 3:17am EDT

* Nikkei, Topix both rise 2.7 pct as bargain hunters pick up
battered names
    * Volume lowest since late March as market cautious ahead of
Fed outcome
    * Nikkei crawls out of bear market

    By Ayai Tomisawa
    TOKYO, June 17 (Reuters) - Japan's Nikkei share average
jumped 2.7 percent and recovered the 13,000-mark on Monday, as
stocks such as exporters caught in the recent market rout
bounced on bargain-buying.
    However, trading was subdued ahead of the widely anticipated
outcome of the U.S. Federal Reserve policy-setting meeting later
this week.
    The Nikkei gained 346.60 points to 13,033.12 after
trading as low as 12,549.82 earlier on the back of weak U.S.
stocks on Friday.
    The Japanese market has been hit by extreme volatility and
big falls in recent weeks, with the index slumping to bear
market territory due to concerns that the Fed may scale back its
stimulus programme this year and a slowdown in the Chinese
economy.
    Disappointment over the government's recently unveiled
growth strategy has also led some investors to trim back their
high expectations for Prime Minister Shinzo Abe's
growth-spurring policies.
    But analysts said that Japanese shares seem to have hit the
bottom as investors are expected to focus on likely improving
companies' earnings this fiscal year.
    "This should be a good bargain hunting period as Japanese
companies' earnings are expected to recover this fiscal year,"
said Masayuki Kubota, senior fund manager at Daiwa SB
Investments. "But even if the Nikkei rebounds now, we may not
expect a steady rise... not until we confirm a recovery in
earnings for the April-June period. Then, it will likely start
rising steadily."
    The Topix advanced 2.7 percent to 1,084.72.
    But volume was light, with only 2.48 billion shares changing
hands, the lowest since March 27 as investors remained cautious
before the outcome of the Fed meeting starting Tuesday.
    The benchmark Nikkei, which gained about 53 percent in the
year to a 5-1/2-year high on May 23, has fallen 18.2 percent
since then. But it is still up 5.4 percent since April 4, when
the Bank of Japan unveiled sweeping stimulus measures aimed at
breaking years of entrenched deflation and reviving growth.
    On Monday, exporters rose, with Toyota Motor Corp 
gaining 2.0 percent, Honda Motor Co adding 1.5 percent
and Sony Corp rising 1.4 percent.
    Exporters' performances have been choppy in recent weeks as
concerns over corporate earnings have emerged in response to
growing volatility in the foreign exchange market which has seen
the yen rebound from 4-1/2 year lows against the dollar. The
wild swings in the Nikkei has been a key factor in the Japanese
currency's bounce, as investors were forced to unwind short-yen
positions.
    But analysts said that unless the yen's strength sustains 
for a while longer, exporters' earnings will likely see growth,
and therefore are likely to be bought again on rising profit
expectations.
    Nomura Securities said it sees prospects of a 30 percent
rise in recurring profits for the year ending March even with
the dollar trading at 90 yen.
    Goldman Sachs was also upbeat on the market, maintaining its
12-month Nikkei target of 17,000, and said the pullback offered
another opportunity to invest in reflation and
consumption-related stocks.
    "The yen is not the sole driver of Japan's profit recovery.
Evidence is growing that consumption, production and housing
investment are improving, so even if the dollar/yen averages 95
in FY2013-FY2014, EPS growth would still reach nearly 70
percent," the brokerage wrote in a note.
    The dollar last traded at 94.95 yen.
    Defensive stocks also attracted buyers, with Japan Tobacco
 gaining 5.0 percent, while Takeda Pharmaceutical Co Ltd
 rose 3.6 percent.