December 4, 2013 / 1:15 AM / 4 years ago

Nikkei pulls back from 6-year closing high as yen bounces

* Nikkei still up 50 pct YTD, heading for best yearly rise
since 1972
    * Credit Suisse further lifts overweight in Japanese stocks

    By Dominic Lau
    TOKYO, Dec 4 (Reuters) - Japan's Nikkei stock average pulled
back on Wednesday from a six-year closing high set the previous
day, with investors pocketing gains as the yen was squeezed
higher ahead of the U.S. November jobs report due later this
    The Nikkei, which tends to weaken when the yen
strengthens, shed 1.3 percent to 15,552.56 after reaching its
highest closing level since December 2007 on Tuesday.
    Currency-sensitive exporters came under pressure, with
Toyota Motor Corp, Honda Motor Co Ltd, Fuji
Heavy Industries, Mazda Motor Corp and Apple
supplier Nitto Denko Corp down between 0.8 and 2.1
    The Japanese currency pulled up from a six-month low against
the dollar and a four-year trough versus the euro
 amid demand for safe-haven assets after a decline in
global equities. U.S. stocks fell on Tuesday, with the Standard
& Poor's 500 index off 0.3 percent.
    Investors were concerned the U.S. Federal Reserve will start
dialling back its stimulus sooner than thought after recent
largely positive economic data. Friday's nonfarm payrolls report
was likely to offer further clues as to when the Fed may act.
    "Tapering could be some time this year ... end of this
month. That would actually mean people are a little bit
cautious, taking some profits. In general, they are bullish," a
Tokyo-based sales trader said, referring to the weak yen.
    He said some investors took the opportunity to pick up
shares of companies with strong outlooks, such as Murata
Manufacturing Co Ltd, which was down 0.1 percent,
faring better than the Nikkei.
    This year's stellar performers also took a hit, with mobile
operator SoftBank Corp, the most traded on the main
board, down 1 percent. It was the second-best performer in the
Nikkei year-to-date as of Tuesday close, with a 175 percent
increase, more than triple the gain for the benchmark Nikkei.
    Mazda Motor was the best performer so far this year, with
Fuji Heavy Industries coming in the third spot.
    Driven by Japan's massive fiscal and monetary stimulus, the
Nikkei is up nearly 50 percent this year. If the gains were to
hold for the rest of the year, it would be the Nikkei's best
yearly performance since 1972.
    Fast Retailing Co Ltd eased 0.9 percent, as the
broad market selloff tempered a 7.7 percent rise in same-store
sales at its Uniqlo casual clothing chain in Japan in November.
    The broader Topix index was down 0.9 percent at
1,251.77, with volume at 25 percent of the fully daily average
for the past 90 trading days.
    Credit Suisse further increased its overweight position of
Japan in its global equity model portfolio, citing further
weakness in the yen as the Bank of Japan was expected to offer
further stimulus, the country as a late-cycle play on global
recovery, strong earnings revisions, improving macro momentum,
and reasonable valuations.
    "The key to us is that Abe's popularity is still at a level
where his mandate for change remains strongly supported. We
would not be inclined to 'give up' on the Third Arrow (of Abe's
reforms) unless Abe's popularity falls below 50 percent,"
analysts at Credit Suisse wrote in a report.
    Among its top picks for 2014 were Dai-ichi Life Insurance
, Toshiba Corp, Sony Corp, real estate
firm Mitsui Fudosan Co Ltd, tyre maker Bridgestone Corp
 and retailer Seven & I Holdings.

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