May 17, 2013 / 7:20 AM / 4 years ago

Nikkei hits new 5 1/2-year high on real estate, agricultural shares

* Japan stocks remain firmly footed in structural bull
market - JPMorgan
    * Hitachi up on higher operating margin forecast
    * Nikkei posts 2nd-straight weekly gains

    By Ayai Tomisawa
    TOKYO, May 17 (Reuters) - The Nikkei share average rose on
Friday with investors snapping up reflationary plays such as
real estate stocks on the dips - posting a second week of gains
supported by the benign effects of a weak yen.
    Agriculture-related stocks also lifted the market, with
Prime Minister Shinzo Abe's second tranche of economic strategy
expected to include growth in the farm sector when he speaks on
Friday.
    The benchmark Nikkei gained 0.7 percent to
15,138.12, the highest closing level since December 2007. The
index rose to as high as 15,157.32 earlier, the highest intraday
level of the period. It gained 3.6 percent in the week.
    The index reversed from negative territory in the morning as
investors bought back reflationary stocks such as real estate
firms which were battered early this week when long-term debt
yields rose. 
    Market analysts said that many long-only investors have yet
to catch up with the steep rises in the Japanese market, which
has gained around 45 percent since the beginning of the year,
propelled by the government's bold monetary easing and reflation
drive. 
    The index has gained 6.7 percent since last Thursday, when
the dollar broke above the 100-yen mark.
    "Investors want to buy Japanese stocks if there is room for
buying on the dips because they expect the market to rise
higher," said Hikaru Sato, senior technical analyst at Daiwa
Securities.
    Mitsubishi Estate Co gained 3.4 percent and Mitsui
Fudosan Co added 2.4 percent.
    Farm-related stocks also attracted gains from retail
investors on speculation that Abe's third economic reform 
pillar, which is growth strategy, will include bolstering
agriculture exports.
    Agricultural chemical manufacturer Nihon Nohyaku Co 
surged 16 percent and tractor maker Iseki & Co jumped
17 percent.
    In the longer term, market players expect a further rise in
the Japanese market as the weakening in yen has improved the
profit outlook for many Japanese firms. Many exporters have used
assumptions of around 90-95 yen to the dollar for the year
ending March 2014 - outlooks which now look very conservative as
the dollar is trading around 102 yen.
    "Japanese risk assets - equities and real estate - remain
firmly footed in a structural bull market. We maintain our
long-standing Topix target of 1,400 by end-2013, and add a new
target of 1,800 to be hit by end-2014," wrote Jesper Koll,
director of Japan equity research at JPMorgan in a note.
    "In our view, the powerful combination of relentless
monetary stimulus, rising visibility of earnings, and concrete
forward-looking corporate investment strategies is only just
beginning to build momentum and will be sustained for
multiple years."
    The Topix rose 0.6 percent to 1,253.24 in moderate volume,
with 4.40 billion shares changing hands, compared to last
month's average daily volume of 4.31 billion shares.
    But analysts said that due to the steep rises in the market
over a short period of time, caution against overbought signs
may again trigger a correction in the near term.
    Blue-chip exporters were mixed, with Panasonic Corp 
falling 0.7 percent, Toyota Motor Corp gaining 0.3
percent and Nikon Corp sliding 1.2 percent.
    But Hitachi Ltd rose 3.2 percent after it said 
that it will expand its global workforce over the next three
years, while aiming to boost its annual operating profit margin
to more than 7 percent from 4.7 percent.

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