* Nikkei gains 0.4 pct, Topix up 0.1 pct
* China HSBC PMI rises above 50 for 1st time in 6 months
* Dow, S&P 500 end at record highs on rates view
* Technical indicators suggest market overheating
By Tomo Uetake
TOKYO, June 23 Japanese shares climbed to a
five-month high on Monday morning, after an upbeat survey on
Chinese manufacturing activity added to the positive mood from
the U.S. Federal Reserve's dovish policy stance.
The benchmark Nikkei advanced 0.4 percent to
15,404.78 by the midday break, after rising as high as
15,405.16, its best level since Jan. 24.
Activity in China's factory sector expanded in June for the
first time in six months as new orders surged, a preliminary
HSBC survey showed, offering new signs the world's
second-largest economy is stabilising thanks to Beijing's
measures to shore up growth.
U.S. equities rose on Friday, driving the Dow and the S&P
500 to close at record highs, boosted by money managers
convinced that policymakers will keep a lid on interest rates
"It seems like short-selling is becoming a bit difficult,"
said Yasuo Sakuma, portfolio manager at Bayview Asset
Management, noting that the ratio of short-selling has dropped
sharply this month to around 26 percent from above 30 percent.
"Investors may be getting nervous about risk of not having
Japanese shares. They may have snapped up a lot of shares last
week, looking at the jump in trading volume on Thursday and
Construction equipment makers, which have considerable
exposure to China, outperformed following the Chinese survey,
with Hitachi Construction jumping 2.5 percent. Komatsu
also rose 1.1 percent.
Oil and coal companies also made hefty gains of
1.5 percent to become the best performing sector on the Topix,
underpinned by the recent rise in oil prices, with Idemitsu
Kosan climbing 2 percent.
As the Nikkei has risen almost 10 percent in just over a
month from a low below 14,000 hit on May 21, some investors are
getting nervous over the possibility of a correction.
The broader Topix's 14-day relative strength index rose to a
13-month high of 75 -- above the 70 threshold, a level seen as
indicating an overbought territory.
Another strong sign comes from the up-down ratio, a gauge
closely watched by Japanese players. The rate of the number of
shares that advanced over the past 25 sessions divided by that
of declining shares rose above 150 percent, its highest level in
more than a year, well above the 120 mark that is considered to
signal an overbought territory.
Investors are also concerned the conflict in Iraq could lift
oil prices further by disrupting oil supply as Brent crude
neared nine-month highs late last week, touching $115.71
a barrel. Iraq is the second-largest OPEC producer.
Still, many market players are sticking to a bullish view
for now, that valuations are still not that expensive.
According to Thomson Reuters Starmine, the Nikkei 225's
dividend yield is 1.8 pct, three times as much as the 10-year
Japanese government bond yield. It is traded at 1.3 times its
book value on the whole, with about a third of its constituents
still trading below their book value.
Bucking the overall market, Sapporo Holdings
dropped 1.2 percent after the brewer said it would post a
special loss of 11.6 billion yen ($114 million) in the second
quarter ending this month, as it prepares to pay that much in
additional liquor taxes after questions over whether one of its
beverages was classified wrongly in a lower tax segment.
The Topix added 0.1 percent to 1,269.74 in moderate
trade, while the JPX-Nikkei Index 400 rose 0.1
percent to 11,555.07.
($1 = 102.0500 Japanese Yen)
(Editing by Jacqueline Wong)