Japanese share prices are expected to post fresh gains next week as foreign investors remain net buyers buoyed by optimism over the world's second largest economy, analysts said Friday.
The market, however, could succumb to profit-taking and investors will closely look at US housing data for further clues on the US interest rate outlook, they added.
For the week ended August 18, the Tokyo Stock Exchange's benchmark Nikkei-225 index advanced 540.96 points or 3.48 percent to close at a three-month high of 16,105.98. The broader TOPIX index of all first-section stocks rose 63.53 points or 4.03 percent to close at 1,641.45.
"Japanese stocks have shown steady movement supported by foreign investors' active participation. The issue for the next week is how share prices will be weighed by profit-taking," said Kazuhiro Takahashi, equity general manager at Daiwa Securities SMBC.
Foreign investors have been net buyers of Japanese stocks stretching back to July.
"Share prices are seen to try the 16,500 point level next week if foreign investors remain active buyers and US stock markets are steady," Takahashi said.
Japan next week releases trade statistics and its consumer price index, which is expected to confirm the country is emerging out of deflation.
Market participants will also carefully watch the US housing market, with figures on home sales for July out next week.
Recent US data have shown weakening US economic growth and are expected to pressure the US Federal Reserve to keep interest rates unchanged at its next policy meeting in September.
The US central bank last week paused its two-year cycle of back-to-back rate hikes.
"US stock markets were heartened as eased inflation worries reduced the expectation on the Fed's rate hikes. If market sentiment remains supported, share prices are expected to try higher," Takahashi said.
Hiroaki Hiwada, strategist at Toyo Securities, said the market will benefit from the return of investors who were on summer vacation.
"Japanese share prices are seen to be higher next week due to the improved supply and demand (of participants) amid a solid Japanese economy," he said.
Hiwada forecast the Nikkei-225 benchmark index will be traded between the 15,800 and 16,700 point levels next week.
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