* Nikkei rises 2.7 pct, Topix up 2.5 pct
* Nikkei still on track for longest monthly winning run
By Dominic Lau
TOKYO, May 24 The Nikkei share average regained
ground on Friday after a 7.3-percent dive in the previous
session, which most market watchers said marked a long-overdue
correction and didn't presage the end of a remarkable six-month
Thursday's biggest one-day percentage drop in two years was
triggered by weak manufacturing activity data in China, Japan's
second-biggest export market, as well as worries about an
earlier-than-expected roll-back of U.S. stimulus.
The Nikkei climbed 2.7 percent to 14,867.90 after
trading as high as 15,007.50. Despite Thursday's slide, the
index is up 7.3 percent so far this month, on track for a 10th
straight month of gains -- its longest such winning streak since
"This shows the strength and the robustness of the market.
You are not getting panic investment," said a Tokyo-based
analyst, who declined to be identified. "I'm surprised it didn't
sell off another day. This goes to show that people want to put
assets to work."
The Nikkei is up over 70 percent since mid-November, buoyed
by Prime Minister Shinzo Abe's policy prescription of aggressive
monetary and fiscal policies to revive the world's third-largest
Toyota Motor Corp rebounded 2.4 percent and was the
second-most traded stock on the main board by turnover, while
Mazda Motor Corp jumped 7.2 percent after tumbling 7.6
percent in the previous session.
"It's just a speed bump, in my view. The Japanese market is
due for a technical correction after strong returns we have this
year," said U.S.-based Audrey Kaplan, fund manager of the $656
million Federated InterContinental Fund.
"The economic conditions in Japan are substantially better
then they were a few months ago. That will support the market
going forward," she said, adding that she has increased Japan
weightings in her fund to 20 percent from 14.9 percent at the
end of March.
Japanese companies' one-month earnings momentum -- analysts'
earnings upgrades minus downgrades as a total of estimates --
stood at 9.8 percent this month versus 9.7 percent in April,
according to Thomson Reuters I/B/E/S. It was minus 7.2 percent
Among Kaplan's top picks in the currency-sensitive exporters
were farm equipment and machinery maker Kubota Corp and
Toto Ltd, maker of sanitary earthenware and faucets.
Kubota was up 2.9 percent and Toto gained 3.3 percent.
The broader Topix index advanced 2.5 percent to
1,218.24 on Friday morning, with volume at 69 percent of its
full daily average for the past 90 trading days.
The Nikkei volatility index fell 17.5 percent after
jumping 58 percent in the previous session when investors' risk
appetite took a tumble.
Buoyed by the Nikkei's surge since mid-November, Japanese
equities' 12-month forward price-to-earnings ratio now stands at
15.9, a level not seen since May 2010, according to Thomson
While Friday's rebound came as a welcome relief, the
Tokyo-based analyst expects more volatility in the next few
"On the one hand, you have domestic investors who have less
regard for valuations. Then you have serious institutional
investors who sadly have a master to answer to. As a result they
have to justify holding stocks at ridiculous valuations," he
"It's becoming very hard when you have retail investors who
have gone through from 18 percent of turnover to 40 percent of
turnover. That's a huge shift. A lot of these moves have put
stocks at a pricing level which you cannot justify in