By Aiko Hayashi
TOKYO, Feb 25 (Reuters) - The Nikkei average rose more than 3 percent on Monday, posting a six-week closing high as market sentiment improved after a newspaper said China’s sovereign wealth fund would buy as much as $10 billion in Japanese stocks.
Another big boost came from financial shares including top insurer Millea Holdings (8766.T) and banks as talk of a U.S. bond insurer rescue plan eased concern about the subprime loan crisis.
Inpex Holdings Inc (1605.T) and property firms advanced after Britain’s Times newspaper said the $200 billion China Investment Corp (CIC) would consider purchasing a large stake in the oil and gas developer and eventually move towards direct investments, such as in real estate. [ID:nT2430]
“For Japanese stocks, the biggest positive driver for today is the China sovereign wealth fund news,” said Fujio Ando, senior managing director at Chibagin Asset Management.
The Nikkei average .N225 rose 3.1 percent or 414.11 points to end at 13,914.57, its highest close since Jan. 15.
“The next target will be whether the Nikkei is able to touch 14,000, but that will still depend on the outlooks for economic health and next year’s earnings,” Ando said.
In the United States this week the market is awaiting the release of several price indexes and growth indicators, which will help determine whether the Federal Reserve will keep cutting interest rates as it seeks to stimulate the economy.
Yusuke Sakai, manager of equities trading at Mizuho Securities, said if some sovereign wealth funds were to start buying Japanese stocks it would help limit falls, though they might not be able to significantly boost the market.
The broader TOPIX index .TOPX was up 2.6 percent or 34.17 points at 1,355.54, its highest finish since Feb. 4.
Some technical analysts said charts pointed to further rises as the Nikkei average broke above a high on Feb. 4 hit after a recent bottom was reached on Jan. 22, clearing “neckline” resistance at around 13,890.
“I think we can say the market has entered a bullish phase,” said Shoichiro Yamauchi, a technical analyst at Nomura Securities.
U.S. stocks staged a late rally on Friday on news that banks were near a deal to bail out bond insurer Ambac Financial and a rescue could come this week, but a person familiar with the matter told Reuters that while progress had been made the deal might still fall through.
Shares of Inpex rose 7.9 percent to 1.23 million yen, while among property firms Mitsubishi Estate Co Ltd (8802.T) jumped 6 percent to 2,580 yen and Sumitomo Realty & Development Co Ltd (8830.T) advanced 4.4 percent to 1,900 yen.
The Chinese sovereign fund will first concentrate on Tokyo stocks and eventually move towards direct investments such as in real estate, the Times said, citing sources close to Japanese Financial Services Minister Yoshimi Watanabe.
Insurers surged on the Ambac rescue talk, with insurance .IINSU.T becoming the greatest gainer among the subindices, rising 8.1 percent. The banking subindex .IBNKS.T rose 4.1 percent, also on positive sentiment over a possible Ambac rescue.
Shares of Millea, Japan’s top non-life insurance company, shot up 8.9 percent to 4,030 yen, Mitsui Sumitomo Insurance Co Ltd 8752.T climbed 10.2 percent to 1,107 yen, Sompo Japan Insurance 8755.T jumped 9 percent to 974 yen.
Aioi Insurance Co 8761.T surged 14.3 percent to 513 yen even after saying it now expects to fall into the red this year with losses on subprime-related investments expected to balloon to about $857 million. Traders bought on the view that the worst news for Aioi may be out for now. [ID:nT27695]
“Investors like the gains in U.S. financials, buoyed by a monoline (bond insurer) rescue plan expected sometime this week,” said Takahiko Murai, a general manager of equities at Nozomi Securities.
“Still, it (the subprime problem) is deep-rooted. The most troublesome part is that we don’t know how much the related losses will amount to.”
Sony currently runs an LCD panel joint venture with Samsung Electronics Co Ltd (005930.KS). Procurement from Sharp would help it secure panels to meet fast-growing demand for LCD TVs without heavy capital investment.
Sony rose 2.4 percent to 5,140 yen.
Trade was moderate on the Tokyo exchange’s first section, with 2.2 billion shares changing hands, in line with last week’s daily average.
Advancing shares outnumbered decliners by more than nine to one. (Additional reporting by Koichi Kawaguchi, Editing by Michael Watson)