June 17, 2013 / 3:01 AM / 5 years ago

Nikkei advances on gains in defensive stocks, crawls out of bear market

* Nikkei rises 1.2 pct, Topix up 1.3 pct in light trade
    * Nikkei crawls out of bear market
    * Market still cautious as Fed outcome looms

    By Dominic Lau
    TOKYO, June 17 (Reuters) - Japan's Nikkei share average
climbed 1.2 percent on Monday as buying in defensive stocks
helped reverse early losses, nudging  the benchmark out of bear
market territory.
    By the midday break, the Nikkei was up 152.14 points
at 12,838.66 after trading as low as 12,549.82 on the back of
weak U.S. stocks on Friday. Monday's gain took the index above
its 100-day moving average at 12,735.31 but remained below the
Ichimoku cloud in a bearish sign.
    "It's a mixed flow so far. It doesn't seem to be the type of
guys that work on the cash side. It could be something else -
high-frequency trading-driven or it could be retail-driven," a
senior trader at a foreign bank said. "There is nothing on the
cash side here."
    Amid market gyration and uncertainty over whether the U.S.
Federal Reserve will start to scale back its massive stimulus,
investors are likely to be cautious ahead of a two-day U.S.
central bank meeting starting on Tuesday.
    The extreme volatility and big falls in the Nikkei in the
past few weeks have been accompanied by disappointment over the
government's recently unveiled growth strategy, which has led
some investors to trim back their high expectations for Prime
Minister Shinzo Abe's growth-spurring policies.
    Within defensive plays, the food sector was up
3.3 percent and Japan Tobacco gained 4.9 percent, while
Takeda Pharmaceutical Co Ltd rose 2.3 percent and peer
Eisai Co Ltd advanced 3.4 percent.
    The broader Topix index climbed 1.3 percent to
1,070.22 in light trade, with volume at 31 percent of its full
daily average for the past 90 trading days, indicating
relatively low conviction of the rebound.
    The real estate sector, which had rallied 70
percent this year to May 22 as it is seen to benefit most from
Japan's push to reflate the economy, remained under pressure.
    It was the worst sectoral performer on Monday, down 2.9
percent. The sector has lost 28 percent from a 5-1/2 year high
touched on April 12.
    Goldman Sachs, however, remained upbeat on the market,
maintaining its 12-month Nikkei target of 17,000, and said the
pullback offered another opportunity to invest in reflation and
consumption-related stocks.
    "The yen is not the sole driver of Japan's profit recovery.
Evidence is growing that consumption, production and housing
investment are improving, so even if the dollar/yen averages 95
in FY2013-FY2014, EPS growth would still reach nearly 70
percent," the brokerage wrote in a note.
    Investors, mainly hedge funds, have been cutting their long
Japanese equities and short yen positions on the Fed's stimulus
concerns and after the Nikkei had rallied more than 80 percent
from mid-November to its 5-1/2 year peak hit on May 23.
    The Nikkei volatility index dropped 4.9 percent to
39.6 on Monday but remained elevated after hitting 46.2 on
Thursday, its highest close since the March 2011 earthquake and
tsunami. The lower the volatility index, the higher the
investors' risk appetite. 
    The Nikkei has fallen 19.5 percent since hitting the
multiyear peak on May 23, but is still up 3.9 percent since
April 4, when the Bank of Japan unveiled sweeping stimulus
measures aimed at breaking years of entrenched deflation and
reviving growth. The benchmark is up 23.5 percent this year.
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