Japan's Nikkei average marked a five-month closing high above 10,000 for a second day on Friday, propelled by hedge fund inflows from overseas and with a fall in the yen providing additional support. But the index lost steam after scoring an intraday high in the morning as profit-taking emerged, with market players saying they were reluctant to actively take positions ahead of the weekend and the US Thanksgiving holiday next week.
Technicals have brightened after the Nikkei on Thursday broke through solid resistance at its 200-day moving average for the first time since May and gathered momentum. The next target looms around its June high of 10,251.90.
"The unwinding of Asia-long and Japan-short positions appears to have emerged, eyeing the closing of books," said Kazutaka Oshima, president of Rakuten Investment Management. "Japanese stocks have gained on the view that they've been lagging, but that is now gradually fading and the market is becoming short of reasons to keep buying them further." The benchmark Nikkei ended the day up 0.09 percent to 10,022.39, its highest finish since June 22. On the week, it added 3.1 percent.
Foreign investors were net buyers of Japanese stocks over the past two weeks, Ministry of Finance data showed. The broader Topix was up 0.08 percent at 869.52. "The main driving force for recent gains are position adjustments by funds, in which they buy back oversold assets and sell those that had been overbought. Japanese stocks represent an oversold asset," said Kenichi Hirano, operating officer at Tachibana Securities.
"These moves are mainly due to overseas funds who need to close books in November and December, and buying energy like this will likely continue until mid-December. But that means it's not as if Japanese stocks will keep pushing higher at this speed after that."
According to Thomson Reuters StarMine, the Nikkei average is trading at a price-to-book of 1.0 time, compared with the Dow Jones industrial average's 1.9 times and the Hang Seng Index's 1.8 times. Market analysts said even with the Nikkei now moving above 10,000, retail investors remained cautious about jumping back into the Japanese stock market, while foreign investors were the main players.
A Reuters poll showed on Tuesday that Japanese retail investors remained pessimistic on domestic stocks as the country's economy stayed moribund, although sentiment improved slightly for the second consecutive month after an upturn in global shares. The dollar was changing hands at 83.42 yen, near a high of 83.79 yen hit earlier, its strongest level since October 5. Some blue chip stocks clung to gains, though the overall market ran out of steam, with Toyota Motor Corp up 1.6 percent at 3,265 yen and Advantest rising 0.6 percent to 1,681 yen.
Banking shares also climbed. Mizuho Financial Group gained 1.5 percent to 136 yen and Mitsubishi UFJ Financial Group, Japan's biggest bank, advanced 0.5 percent to 414 yen. T&D Holdings Inc climbed 3 percent to 1,953 yen after the insurer more than doubled its net profit to 22.3 billion yen in the April-September half from the same period last year.
Trade was moderate on the Tokyo exchange's first section, with 2.1 billion shares changing hands, after booking the highest volume in six weeks on Thursday at 2.4 billion shares. Declining stocks outnumbered advancing ones, 801 to 692 yen.
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