Nikkei average at 4-1/2-year high

The Nikkei share average closed at a 4-1/2-year high on Monday as investors bought financials and exporters after the yen weakened on signs of recovery in the US economy, while hopes for monetary easing aided risk appetites. The Nikkei closed up 0.5 percent to 12,349.05, a level not seen since just before the collapse of Lehman Brothers roiled global markets in September 2008. The broader market's gains were underpinned by the yen slumping to more than 96 per dollar, its weakest since August 2009, after a strong US jobs report on Friday.
"Expectations for the next fiscal year's earnings are positive, so investors are chasing the market higher," said Makoto Kikuchi, the chief executive of Myojo Asset Management. He said that if listed companies in late April and May forecast increases averaging 60 percent for their operating profits in the year ending March 2014, then the Nikkei could top 13,000 by June.
Signs of a recovery in the US labour market bolstered Japanese stocks, which are already riding a bullish streak on expectations of aggressive easing by the Bank of Japan under governor nominee Haruhiko Kuroda. "This time, the yen weakened not because of Japan but because of the United States, or the recovery in the US economy. It's not something that foreign countries can criticise Japan for," said Naoki Fujiwara, fund manager at Shinkin Asset Management.
The Topix surged 1.9 percent to 1,039.98. Volume was high, with 4.59 billion shares changing hands, compared to last week's average daily volume of 3.44 billion shares. Financials led the sectoral gainers. The banking sub-index jumped 5.5 percent, while the securities and insurance sectors advanced 4.9 percent and 3.4 percent respectively. Sumitomo Mitsui Trust Holdings Inc rose 2.3 percent after the bank said it would repay 200 billion yen ($2.1 billion) in public bailout money, ending more than a decade of partial government ownership.
Mizuho Financial Group Inc and Mitsubishi UFJ Financial Group Inc gained 4.9 and 6.4 percent respectively in heavy trade as the softer yen and government's reflationary policies were expected to stimulate demand for loans, traders said. "On a dollar basis, Japan is now significantly outperforming, and from that perspective it's reflecting the real recovery signs emerging globally for Japanese exports that go beyond the weaker yen," said Stefan Worrall, director of cash equities for Credit Suisse in Tokyo.
Shares of Honda Motor Co Ltd and Nissan Motor Co Ltd got an extra boost from a Citi report that raised their target prices. On Monday, Honda rose 2.6 percent and Nissan was up 3.2 percent. Sharp Corp was out of favour, falling 3.1 percent after the Asahi newspaper said Hon Hai Precision Industry Co Ltd would not invest in the troubled electronics maker before a March 26 deadline.
Shiseido Co Ltd jumped 6.6 percent on news the president of Japan's largest cosmetics company will end an underwhelming tenure that saw profits drop dramatically. The current chairman will take his place. While hopes for the reflationary policies of Prime Minister Shinzo Abe's government's have already lifted financials, real estate and land asset stocks such as warehouse and railroad companies, interests in these sectors will likely continue, market participants say.
The real estate sector has gained about 28 percent this year while the Nikkei has added 19 percent. Compared with real estate elsewhere, Japan's high yielding assets "are attractive to overseas investors," said Masayuki Kubota, senior fund manager at Daiwa SB Investments.
He said real estate stocks such as NTT Urban Development Co and Daibiru Corp, plus warehouse stocks like Mitsui-Soko Co and Sumitomo Warehouse Co have attractive valuations in terms of net asset value. On Monday, NTT Urban rose 4.6 percent, Daibiru added 1.4 percent, Mitsui-Soko jumped 11 percent and Sumitomo Warehouse gained 5.3 percent.