Nikkei reverses losses on weak yen, improving China money market conditions
* Weak yen lifts exporters * Some relief in stressed China money markets also help * China-related stocks underperform * Fed tapering still pressuring market - analyst By Ayai Tomisawa TOKYO, June 25 (Reuters) - Japan's Nikkei share average rose in choppy trade on Tuesday morning, erasing earlier losses as the weak yen offset lingering worries about stress in China's banking system and the U.S. Federal Reserve's plans to roll back its stimulus later this year. The Nikkei advanced 0.7 percent to 13,147.14 by the midday break after dipping below the 13,000 mark earlier. Analysts say investors bought back exporters as the dollar rose above 98 yen, while they also took comfort from an easing in tight liquidity conditions in China's money markets. A recent spike in interbank borrowing costs have raised fears that stress in China's banking system could weigh on already slowing growth, roiling global markets already grappling with the Fed's plan to scale back its stimulus. "Investors are still cautious against Asian share moves, but they have confidence about Japanese stocks and U.S. stocks as they shift to industrialized markets from emerging markets," said Shun Maruyama, chief Japan equity strategist at BNP Paribas. He expects Japanese equities to outperform regional peers that have been hit hard by the ongoing China worries. The Shanghai Composite Index was down 0.9 percent after diving 5.2 percent on the previous day, while the Hang Seng Index rose 0.6 percent after falling 2.2 percent. Exporters underpinned the Nikkei as the dollar rose as high as 98.05 during Asian trade, with Sony Corp rising 1.1 percent, Canon Inc adding 0.6 percent while Honda Motor Co tacked on 0.7 percent. Manufacturers with high exposures to China remained under pressure, with Komatsu Ltd falling 1.5 percent and Nissan Motor Co dropping 0.3 percent. The benchmark Nikkei has dropped around 18 percent since reaching a 5-1/2-year high on May 23, hurt by slowing growth in China, Fed stimulus concerns and disappointment over the Japanese government's recently unveiled growth strategy. The index is still up 26 percent this year helped by Prime Minister Shinzo Abe's sweeping fiscal and monetary expansionary policies aimed at pulling the world's third-biggest economy out of a two-decade long slump. "There are few negative factors in the domestic market, but global worries are keeping investors from taking positions," Kenichi Hirano, a strategist at Tachibana Securities said. Still, the "Abenomics' effect, especially monetary easing, is still continuing, and Japanese shares should continue outperforming its global peers," he added. The Topix gained 0.1 percent to 1,090.52. Analysts expect that Japanese market to remain resilient as long as the dollar trades higher than the 90-95 yen range on which most companies have based their earnings for this fiscal year. A weaker yen lifts exporters' competitiveness in overseas markets and their earnings when repatriated. They added that the market may encounter resistance around 13,300 in the near term on lingering concerns that U.S. monetary stimulus will be scaled back in the near term. The Federal Reserve last week confirmed plans to reduce the amount of cheap money being pumped into the U.S. economy later this year, sending global risk assets skidding sharply.
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