Nikkei gains as China, Fed worries ease, but small caps extend slide
* Asian markets strength giving relief to market * All Topix subsectors in positive territory * Exporters with high exposure to China rise * Mothers Market extends small-cap decline By Ayai Tomisawa TOKYO, June 27 (Reuters) - Japan's Nikkei share average rose above 13,000 on Thursday, bouncing back from a three-day losing streak, as fears of a U.S. stimulus pullback and a Chinese credit crunch eased. The Nikkei gained 1.9 percent to 13,081.01 by the midday break. It dropped 3 percent over the past three days. Analysts said investors were relieved to see a firm rebound in Shanghai shares, which tumbled nearly 10 percent in less than a week on growing signs of strain in China's banking system. Chinese money market rates also continued to moderate. "People are buying back as Asian markets seem to be stable today," said a trader at an European securities firm. All of Topix's 33 subsectors were in positive territory, while the recently battered real estate sector was the best sectoral performer, up 4.9 percent. Sumitomo Realty & Development Co gained 5.4 percent and Mitsui Fudosan Co added 6.3 percent. Exporters with high exposure to China, which tumbled early this week, also gained ground. Komatsu Ltd rose 3.6 percent and Hitachi Construction Machinery Co advanced 3.1 percent. Gains on Wall Street also lifted the mood as weaker-than-expected U.S> first-quarter GDP data reinforced a view that the economy is not strong enough for the Fed to begin scaling back its $85 billion a month bond buying. Such tapering fears have roiled global markets for the last month. The Topix added 1.5 percent to 1,085.16. But weakness in small-to-mid size stocks was again apparent, with the Mothers Market falling 2.6 percent after nose diving 12 percent in the previous session. "Retail investors are reducing their positions on companies which they had bought merely on expectations for growth," said Hideyuki Okoshi, general manager at Chibagin Securities. "The start-up market can be even more volatile than the overall market, so investors don't want to be left behind when the market is sliding." Biochemical companies, which had attracted buying recently, dropped on profit-taking. PeptiDream Inc extended its losses, dropping 17 percent after stumbling 28 percent on the previous day. DNA Chip Research Inc sank 4 percent and Chiome Bioscience dropped 17 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, fears of a pullback in U.S. stimulus and disappointment over the Japanese government's recently announced growth strategy. However, it is still up about 26 percent this year.
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