Japanese stocks rose on Thursday as investors who wanted to limit risk bought into defensive shares. The Nikkei share average gained 1.2 percent to close at 18,096.90. Japanese manufacturers' confidence worsened in October, a Reuters poll showed, adding to fears of recession as well as speculation about possible fresh stimulus from the Bank of Japan.
The pharmaceutical sector added 2.7 percent, highlighting a move to defensive shares from cyclicals after Wall Street fell on Wednesday. Asahi Kasei Corp tumbled 13.6 percent after announcing its subsidiary company had performed faulty installation of a portion of foundation piles in work subcontracted by Sumitomo Mitsui Construction for a Yokohama apartment complex. The broader Topix added 1.4 percent to close at 1,490.72 while the JPX-Nikkei Index 400 gained 1.3 percent to 13,349.87.
Market participants cautioned that the rally was largely built on investors moving into defensive stocks in response to overnight losses on Wall Street. The Dow fell 0.9 percent and the Nasdaq 0.3 percent. "It's not a very healthy recovery when pharmaceuticals are leading the charge," said Nicholas Smith, a strategist at CLSA. "Investors are picking up defensives and pretty expensive defensives at that."
The Topix subindex for pharmaceuticals gained 2.3 percent as investors moved out of cyclicals that had been bought during recent bouts of short-covering. Kyowa Hakko Kirin rose 4.8 percent and Daiichi Sankyo Co shares climbed 4.4 percent. Japan's steel sector, which tumbled 4.5 percent on Wednesday, bounced back 1 percent during morning trading. Nippon Steel & Sumitomo Metal rose 0.7 percent while JFE Holdings gained 1.3 percent. Steel has been one of the Nikkei's top performing sectors since late September and traders said it's remained active because of short-covering that has resulted in big price moves.
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