August 14, 2014 / 2:15 AM / 3 years ago

Nikkei extends rally, supported by public buying hopes

* Market supported by expectations of public accounts buying
    * Geopolitical worries, economic uncertainties seen limiting
    * Constructors one bright spot

    By Hideyuki Sano
    TOKYO, Aug 14 (Reuters) - Japanese shares rose on Thursday,
heartened by gains on Wall Street shares and on anticipation
that Japanese public pension funds and other public accounts
will step up buying to shore up the market.
    The Nikkei share average rose 0.6 percent in early
trade to 15,301.97 points, extending a three-day rally, though
trade volume was low due to Japanese traditional "obon" summer
    A rise above its 25-day moving average around 15,325 could
be a positive sign, though many market players see limited
upside potential given geopolitical concerns and worries about
softness in the economy.
    The gains this week have been largely driven by hopes of
more buying from the public sector, such as the $1.2 trillion 
Government Pension Investment Fund.
    The fund is expected to announce more allocations to
domestic stocks later this year as Prime Minister Shinzo Abe has
been urging the fund to review its bond-centric portfolio in
order to improve its returns.
    "For the market to rise further, we need to see upgrade in
corporate earnings. And for that to happen, we need to see an
improving Japanese business sentiment," said Masayuki Doshida,
senior market analyst at Rakuten Securities.
    Indeed, machinery orders data published earlier joined a
long list of disappointing economic data in recent weeks. 
    Orders rose just 8.8 percent in June, way below average
forecast of 15.3 percent rise, even after massive falls in
preceding two months, adding to the evidence that the impact of
tax hike in April was bigger than initially thought.
    The figure came a day after the government said Japan's
economy shrank an annualised 6.8 percent in April-June, showing
growth has effectively stalled in the past three quarters.
    Amid short-term economic uncertainties, investors picked up
construction companies, which are seen as a long-term winning
bet as Tokyo hosts the Olympic Games in 2020.
    The construction companies subindex was the best
performer on Thursday morning, rising 1.4 percent.
    Obayashi Corp rose 3.3 percent and Kajima Corp 
gained 1.4 percent, both hitting seven-year highs while Shimizu
Corp rose 1.8 percent to an eight-year high.
    Bucking the trend, money lender Aiful fell 11.9
percent after it cut its profit outlook. It was the most traded
stocks on the main board.
    The broader Topix rose 0.5 percent while the new
JPX-Nikkei Index 400 also rose as much.

 (Editing by Kim Coghill)
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