(Corrects paragraph four to clarify that the trader works for a
foreign but not European bank)
* Nikkei rises 0.7 pct, Topix gains 1 pct
* Isuzu jumps on possible GM joint development
By Dominic Lau
TOKYO, Jan 10 Japan's Nikkei average advanced on
Thursday as renewed weakness in the yen bolstered shares of
exporters, which have rallied over the past two months on
expectations that the central bank would ease its monetary
policy more aggressively.
The Nikkei rose 0.7 percent to 10,652.84 in
midmorning trade, taking the index deep into "overbought"
territory. Its 14-day relative strength index stood at 75.8,
above the 70-mark which is deemed overbought and often indicates
the market is ripe for a correction in the near term.
Shares of exporters, which have suffered from a strong yen
and competition from South Korean companies, have been boosted
by the yen's depreciation in the past two months. The currency
has been weakening since Shinzo Abe, the new prime minister,
called on the Bank of Japan to adopt a bolder policy to
revitalise the economy, including setting an inflation target of
2 percent. During that period, the Nikkei has rallied 23
A senior trader at a foreign bank said some people remained
sceptical of the rally, and many were buying derivatives instead
of taking big positions in stocks.
"It's sort of a slow burn but I actually prefer this. It's a
much nicer rally where you have this 50, 60 basis points move
higher than this crazy 3 percent, 4 percent day when we squeeze
higher," he said. "It's a much higher quality rally because it
gives people time to work and think of what they want to do."
The trader said many investors were looking at call options
with a strike price of 11,000, some 3.3 percent above the
Nikkei's current level.
Among exporters, Toyota Motor Corp, Honda Motor Co
, Daikin Industries and Nikon Corp
rose between 1.4 and 3.3 percent.
The yen was down 0.3 percent at 88.190 to the dollar
on Thursday after falling 1 percent in the previous session.
Isuzu Motors Ltd climbed 4.6 percent, outpacing
other automakers after General Motors Co said it and
Isuzu would discuss the possibility of jointly developing a
next-generation pickup truck.
The broader Topix index gained 1 percent to 887.42.
A change in sentiment towards Japan after Abe's call has
perked up foreign investors' interest in Japanese equities.
Foreign investors bought a net 178.9 billion yen ($2 billion)
worth of shares in the week ended Jan. 5, the eight consecutive
week of net purchases, Ministry of Finance data showed.
BNP Paribas, however, recommended that investors book
profits before the central bank's policy meeting on Jan. 21 and
22, saying gains were likely to be limited in the short term.
"We are expecting a short-term upside to be limited: those
with exposure can implement an overlay by staying long and
selling an out of the money call as a yield enhancement
strategy; those without exposure can buy a call spread when the
market consolidates; and we would not object to investors who
want to unwind part of the positions in order to lock in
profits," the bank said in a research note.
($1 = 87.8450 Japanese yen)
(Editing by Chris Gallagher)