Nikkei hits 6-wk closing high on China fund report

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By Aiko Hayashi

TOKYO, Feb 25 (Reuters) - The Nikkei average rose more than 3 percent on Monday, posting a six-week closing high as market sentiment improved after a newspaper said China's sovereign wealth fund would buy as much as $10 billion in Japanese stocks.

Another big boost came from financial shares including top insurer Millea Holdings (8766.T) and banks as talk of a U.S. bond insurer rescue plan eased concern about the subprime loan crisis.

Inpex Holdings Inc (1605.T) and property firms advanced after Britain's Times newspaper said the $200 billion China Investment Corp (CIC) would consider purchasing a large stake in the oil and gas developer and eventually move towards direct investments, such as in real estate. [ID:nT2430]

"For Japanese stocks, the biggest positive driver for today is the China sovereign wealth fund news," said Fujio Ando, senior managing director at Chibagin Asset Management.

The Nikkei average .N225 rose 3.1 percent or 414.11 points to end at 13,914.57, its highest close since Jan. 15.

"The next target will be whether the Nikkei is able to touch 14,000, but that will still depend on the outlooks for economic health and next year's earnings," Ando said.

In the United States this week the market is awaiting the release of several price indexes and growth indicators, which will help determine whether the Federal Reserve will keep cutting interest rates as it seeks to stimulate the economy.

Yusuke Sakai, manager of equities trading at Mizuho Securities, said if some sovereign wealth funds were to start buying Japanese stocks it would help limit falls, though they might not be able to significantly boost the market.

The broader TOPIX index was up 2.6 percent or 34.17 points at 1,355.54, its highest finish since Feb. 4.

Some technical analysts said charts pointed to further rises as the Nikkei average broke above a high on Feb. 4 hit after a recent bottom was reached on Jan. 22, clearing "neckline" resistance at around 13,890.

"I think we can say the market has entered a bullish phase," said Shoichiro Yamauchi, a technical analyst at Nomura Securities.

U.S. stocks staged a late rally on Friday on news that banks were near a deal to bail out bond insurer Ambac Financial and a rescue could come this week, but a person familiar with the matter told Reuters that while progress had been made the deal might still fall through.

INPEX, PROPERTY FIRMS UP, FINANCIALS GAIN

Shares of Inpex rose 7.9 percent to 1.23 million yen, while among property firms Mitsubishi Estate Co Ltd (8802.T) jumped 6 percent to 2,580 yen and Sumitomo Realty & Development Co Ltd (8830.T) advanced 4.4 percent to 1,900 yen.