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Nikkei up more than 1 pct as Cyprus, EU agree rescue deal
March 25, 2013 / 1:30 AM / 5 years ago

Nikkei up more than 1 pct as Cyprus, EU agree rescue deal

* Nikkei rises 1.4 pct, Topix adds 0.8 pct
    * Cyprus reaches deal for 10 bln euro bailout

    By Dominic Lau
    TOKYO, March 25 (Reuters) - Japan's Nikkei share average
rebounded on Monday after a sharp fall at the end of last week,
as Cyprus and the European Union agreed to a plan to resolve the
island's financial crisis.
    The Nikkei advanced 1.4 percent to 12,506.94 after
dropping 2.4 percent in the previous session.
    "Euro-related companies have a pretty good performance so
far," a Tokyo-based trader said.
    "Our house view on Cyprus is that it will be difficult but
it will be solved. The big picture is looking quite good,
especially for Japan."
    An EU spokesman said Cyprus and international lenders
reached a deal for a 10 billion euro ($13 billion) bailout that
would shut down its second-largest bank and inflict heavy losses
on uninsured depositors. The agreement came hours before a
deadline to avert a collapse of the island's banking system.
 
    Nikon Corp and Ricoh Co Ltd, which have
significant exposure to Europe, both rose 1.8 percent. Other
exporters were also in demand, with Toyota Motor Corp 
up 0.9 percent and TDK Corp adding 2.4 percent
    The broader Topix index gained 0.8 percent to
1,046.58.
    The benchmark Nikkei has surged more than 44 percent since
mid-November, when Shinzo Abe unveiled his plans for
expansionary and monetary policies to revive the world's
third-largest economy that swept him to power late last year.
    The rally has lifted the valuations of Japanese equities,
which carry a 12-month forward price-to-earnings ratio of 14.1,
a level not seen since August 2010. But they are still below
their 10-year average of 16.3, according to Thomson Reuters
Datastream.
    "Fundamentals still look good for Japanese equities. The
improving economy will help company earnings. We are looking for
further upside from here," said Hidehiro Tomioka, head of equity
investment at Manulife Asset Management in Tokyo.
    Tomioka said he favoured financials, which benefit from
Abe's push to reflate the economy, and exporters, which will get
lifted by a softer yen.
    "I prefer the autos rather than electronics because earnings
growth is more stable and stronger for the auto companies. Tech
companies are not as strong, especially if you look at the
competition," he said. 
    Boosted by yen weakness and improving sentiment, more than
half of Japanese companies expect a profit rise in the business
year starting April, a Reuters poll showed on Friday, but
investors looking to gain from the fattened coffers may be
dismayed as firms keep the cash-in-house. 
    Data from Datastream showed Japanese companies' outlook on
earnings improved further this month.
    Their one-month earnings momentum -- analysts' earnings
upgrades minus downgrades as a total of estimates, rose to 8.7
percent in March from 8 percent last month. It was minus 10.9
percent in November.

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