April 10, 2013 / 7:06 AM / 5 years ago

Nikkei at highest close in nearly 5 years as new money flows in

* Nikkei rises 0.7 pct, Topix up 1.7 pct
    * Topix's trading volume hits second highest this year
    * Banks, securities firms in demand

    By Dominic Lau
    TOKYO, April 10 (Reuters) - Japan's Nikkei average climbed
to its highest closing level in nearly five years on Wednesday,
with traders citing new money coming into the market after the
central bank started its ultra-loose monetary easing this week.
    The benchmark has rallied 7.5 percent since the Bank of
Japan unveiled last Thursday that it planned to inject $1.4
trillion into the world's third-largest economy to defeat
deflation. It conducted its first bond buying operations on
    "There is a lot of new money coming into the market, a
mixture of hedge funds and long money. I would say probably
mainly U.S. long money are the top buyers," a senior trader at a
foreign bank in Tokyo said.
    The Nikkei ended 0.7 percent higher at 13,288.13,
its highest closing level since August 2008.
    Lenders Mitsubishi UFJ Financial Group and Sumitomo
Mitsui Financial Group were the two most-traded stocks
on the main board by turnover. They rose 5 and 6.7 percent,
    Peer Mizuho Financial Group gained 2.8 percent and
was the fifth-most traded, while Japan's top brokerage, Nomura
Holdings, jumped 6.2 percent.     
    "Certainly financials are the focus of my clients ... There
is a little bit of profit-taking in one or two exporter names
but nothing significant," the trader said. "Everyone is
reluctant to do any shorting, which is helping the upside
momentum of the market."
    Societe Generale said the most traded of April Nikkei index
stock options was a call with a strike price of 13,500, 1.6
percent above where the benchmark ended on Wednesday.
    The next most traded was a put with a strike price of
12,750, followed by another call at 13,750.     
    The broader Topix advanced 1.7 percent to 1,121.04,
just below the 38.2 percent retracement of its slide from
February 2007 to June 2012, at around 1,125.
    Volume on the Topix hit its second highest level this year,
with 5.28 billion shares changing hands.
    HSBC raised its weighting on Japan to 'neutral' from
'underweight', although it questioned the effectiveness of the
BOJ policy.
    "In other categories Japan scores so badly it is impossible
to justify an overweight recommendation," the brokerage wrote in
a report. "Analysts already forecast 49 percent earnings growth
in the year ending March 2014, leaving little room for positive
growth surprises."
    "Valuation is not cheap, with forward P/E of 14.2x the
highest among developed markets. And the long-term story remains
negative, with poor demographics and corporate competitiveness."
    The benchmark Nikkei has rallied more than 53 percent since
mid-November, when Shinzo Abe promised expansionary fiscal and
monetary policies, dubbed "Abenomics", to revive the ailing
economy during his election campaign. He was elected prime
minister the following month.
    During the same period, the banking sector has
surged nearly 79 percent but its valuation remains well below
the average for Japanese equities. 
    The banking sector carries a 12-month forward
price-to-earnings ratio of 11.07 versus more than 14 for the
Topix, data from Thomson Reuters Datastream showed.
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