Japan stocks rebound, led by index futures

(Adds Tokyo Star bid)

By Taiga Uranaka

TOKYO, Dec 21 (Reuters) - Japanese stocks rose on Friday as investors snapped up TDK Corp (6762.T) and other recently battered high-tech shares following gains in their U.S. peers.

Hitachi Ltd (6501.T) climbed after the Nikkei business daily said the firm plans to sell a minority stake in its struggling hard disk drive business to U.S. investment fund Silver Lake.

Steelmakers including Nippon Steel Corp (5401.T) also rose on a solid output forecast, offsetting falls in bank shares.

Still, many market participants said the day's gains did not go beyond a technical rebound, and the market was mostly led by index futures with many players already away on vacation and caution prevailing ahead of a three-day weekend. The market will be closed on Monday for a national holiday.

"I think tech shares were mostly moved by index-related trades since they weigh heavily on the Nikkei average," said Masayuki Otani, chief market analyst at Maruwa Securities.

The market extended gains in the afternoon session after the Wall Street Journal reported that Merrill Lynch could get a capital infusion of up to $5 billion from Singapore state investor Temasek Holdings [TEM.UL], prompting buying of index futures.

Electronics components maker TDK rose 4.6 percent to 8,260 yen and was the biggest contributor to the Nikkei, followed by chip-equipment maker Tokyo Electron Ltd (8035.T), which gained 4.9 percent to 6,810 yen.

The benchmark Nikkei .N225 ended the session up 1.5 percent at 15,257.00. It fell 1.7 percent for the week.

The broader TOPIX index gained 0.8 percent on Friday to 1,469.20.

Trade was moderate with 2 billion shares changing hands on the first section of the Tokyo stock exchange compared with last week's average of 2.1 billion.

Advancing shares outnumbered decliners 1,000 to 607.

After the close, Japanese private equity fund Advantage Partners said it would launch a bid for Tokyo Star Bank Ltd 8384.T, allowing investment fund Lone Star [LS.UL] to cash out of its 68 percent stake in the lender.

Advantage Partners said it would offer 360,000 yen for each Tokyo Star share.

ELECTRONICS IN SPOTLIGHT

Hitachi jumped 3.6 percent to 805 yen as investors welcomed the report that it may sell a stake in its hard disk business.

"The report says it's not the sale of the entire HDD business and uncertainties about the deal remain, but still it will mark a step forward in Hitachi's revival," said Takashi Ushio, head of investment strategy division at Marusan Securities.

Sharp Corp (6753.T) climbed 2.9 percent to 1,956 yen after it said it was considering an alliance with Toshiba Corp (6502.T) in liquid crystal display panels.

Toshiba plans to buy large liquid crystal display (LCD) panels from Sharp as part of an alliance in the flat panel business, sources at the two companies said.

Toshiba will procure panels from a 380 billion yen ($3.4 billion) factory being built by Sharp in Osaka prefecture, western Japan, and use them to make LCD TVs to be sold under its own brand.

Sharp and Toshiba said they would hold a news conference at 6:30 p.m. (0930 GMT) on an alliance in the LCD business but did not elaborate.

Toshiba shares rose 2.5 percent to 837 yen.

Shares of digital camera and office equipment maker Canon Inc (7751.T) fell 2.2 percent to 5,240 following a newspaper report that it would fall short of its 2007 earnings forecasts, hit in part by an accounting change. [ID:nT203514]

The Nikkei business daily said Canon would likely post a group net profit of 488 billion yen for 2007, up 7 percent from a year earlier and a record for the eighth consecutive year thanks to strong sales of colour copiers, printers and digital cameras.

But that would miss Canon's forecast for a 500 billion yen net profit and the market consensus of 502 billion yen in a poll of 22 analysts by Reuters Estimates.

Nippon Steel, the world's second-biggest steelmaker, rose 4.9 percent to 661 yen, becoming the most heavily traded issue on the main board, after a trade organisation issued a solid industry output forecast for next business year.

Rival JFE Holdings Inc (5411.T) climbed 3.2 percent to 5,530 yen.

The Japan Iron and Steel Federation expects the nation's crude steel output to increase 0.7 percent to 119 million tonnes in the year starting in April 2008, following an estimated 0.2 percent gain this business year.

Bank shares fell after Bear Stearns BSC.N posted its first-ever loss, hit by a $1.9 billion write-down in the quarter ended Nov. 30, reflecting the reduced value of subprime-mortgage-related securities.

Mitsubishi UFJ Financial Group (8306.T) finished down 1.2 percent at 1,041 yen. Mizuho Financial Group (8411.T) fell 0.4 percent to 537,000 yen and Sumitomo Mitsui Financial Group (8316.T) shed 2.3 percent to 839,000 yen. (Editing by Mike Miller)