Nikkei rises as Shionogi, Komatsu gain

By Aiko Hayashi

TOKYO (Reuters) - Japan's Nikkei share average rose 1.1 percent on Monday as drugmaker Shionogi (4507.T) jumped after a report that it has developed a new flu drug, while construction machinery makers such as Komatsu (6301.T) gained on a brokerage upgrade that cited robust demand in China.

Daiichi Sankyo (4568.T) advanced 4.1 percent after the drugmaker said on Sunday that Malvinder Singh, chairman and chief executive of its Indian unit, Ranbaxy Laboratories (RANB.BO), had resigned.

"Investors are betting the New York market will likely rise after today's market holiday as it has fallen four days in a row," said Fumiyuki Nakanishi, a manager at SMBC Friend Securities.

U.S. markets will be closed on Monday for the Memorial Day holiday, and British markets will be closed for a bank holiday.

"The (Japanese) government's monthly economic report will be released later today and if it says the economy has hit bottom, as some expect, the stock market will be in an upward trend for about a year as past experiences suggest. That is prompting some buying as well," Nakanishi continued.

In light trade, the benchmark Nikkei .N225 added 105.42 points to 9,331.23, after falling 0.4 percent on Friday.

The broader Topix gained 0.9 percent to 883.46.

U.S. stocks fell for a fourth day on Friday, with the Dow Jones industrial average .DJI down 0.2 percent.

Ratings agency Standard & Poor's rattled markets on Thursday when it said it might cut Britain's AAA credit rating because of the danger of soaring public debt, sparking fears of similar action against the United States.

Takahiko Murai, a general manager at Nozomi Securities said index-related buying by newly set up funds appeared to be helping to push the market higher, but that caution remained ahead of U.S. economic data such as housing sales.

Figures for existing home sales in April will be released on Wednesday, and new home sales data for the same month comes out on Thursday.

"U.S. housing data is a focus precisely because the data is important in gauging the outlook for the economy. If it turns out to be poor, the market will likely react negatively," Murai said.

Analysts also said investors were watching out for news on the fate of General Motors GM.N.

GM faces a June 1 deadline to work out issues with its creditors if it wants to avoid a bankruptcy filing. On Friday, a spokesman for some GM creditors said the company's largest bond holders, with a total of roughly $27 billion in debt, plan to reject GM's current offer for a 10 percent equity stake.

SHIONOGI POWERS HIGHER