* Nikkei down 0.2 pct, Topix up 0.4 pct * Equities' 12-mth fwd P/E falls to level last seen in early April By Dominic Lau TOKYO, July 1 (Reuters) - Japan's Nikkei average seesawed on Monday morning after posting its biggest one-day rise in three weeks in the previous session, although long-only investors were picking up banking shares. The Nikkei slipped 0.2 percent after trading as low as 13,624.90 and as high as 13,746.72. The index jumped 3.5 percent to a three-week high of 13,677.32 on Friday. "Volume overall is on the light side. There is not a whole lot of trend of what we are buying recently. But it does seem like there is a bit of banking buying today," a senior trader at a foreign bank said, adding that his bank's buy orders outpaced sell orders. "Better activity from long-only investors, more so than hedge funds. "Maybe it's because Hong Kong is off that were are seeing less volume from (hedge funds) today" Lender Sumitomo Mitsui Financial Group, up 2.3 percent, was the most traded stock on the main board by turnover, followed by rival Mitsubishi UFJ Financial Group , up 2.6 percent. The senior trader said investors remained cautious on China, Japan's second-largest export market, ahead of the final reading of the June Purchasing Managers' Index, due out at 0145 GMT. Some currency-sensitive exporters were supported by a weaker yen. The Japanese currency was last traded at 99.35 yen to the dollar, down from Friday's high of 98.370, as investors resumed pricing in the possibility of the U.S. Federal Reserve beginning to scale back its bond-buying programme as soon as its September policy meeting. Among the exporters on the rise were Daikin Industries , Toyota Motor Corp, Mazda Motor Corp and Sony Corp, up between 0.5 and 3.4 percent. Japanese manufacturers' sentiment turned positive in the three months to June for the first time in nearly two years, the Bank of Japan's quarterly Tankan survey showed, a sign the recent market turbulence has yet to hurt the feel-good mood created by the government's reflationary policies. The broader Topix index gained 0.4 percent to 1,138.18, with volume at 19 percent of its full daily average for the past 90 trading days. On the losing ledger, wireless operators SoftBank Corp and KDDI Corp slipped 0.9 and 1.2 percent, respectively. The Nikkei rallied more than 80 percent to a 5-1/2 year peak on May 23 since November, when prime minister Shinzo Abe's election campaign promised bold fiscal and monetary expansionary policies to revive the world's third-largest economy, dubbed "Abenomics." But since then, the benchmark has lost 14 percent on concerns over the Fed paring its stimulus, slowing growth in China, and disappointment over Abe's growth strategies. Japanese equities' 12-month forward price-to-earnings ratio fell to 13.3 - a level not seen since early April - from a three-year high of 16.3 reached four weeks ago according to Thomson Reuters Datastream. The Nikkei is still up more than 10 percent since the BOJ announced radical monetary stimulus on April 4 and has risen 31 percent this year.