Tokyo shares likely to face another nervous week

Japanese share prices face another nervous week ahead and although investors are cautious, there is some optimism that the worst of the recent turmoil is now over, dealers said Friday. For the week to March 9, the Tokyo Stock Exchange's benchmark Nikkei-225 declined 53.89 points or 0.31 percent to 17,164.04, following a 5.3 percent plunge the previous week.
The broader-based TOPIX index of all first-section companies gained 8.72 points or 0.51 percent to 1,730.31. "Market sentiment is recovering as the global turbulence has been subdued," said Hirokazu Fujiki, a strategist at Okasan Securities.
"The turmoil was in fact based on speculation, namely by hedge funds, not based on fundamentals," Fujiki said. "Although nervous trading is expected to continue for now, we don't expect a repeat of such volatility next week," he said. "It's fair to say that there is a good chance of recovery."
The Nikkei index plunged 575.68 points or 3.34 percent on Monday to 16,642.25, the lowest close since December 12, mirroring heavy losses across Asia fuelled by concerns about the health of global markets.
Share prices, however, gradually recovered toward the end of the week as investors slowly regained confidence, pushing the Nikkei 225 back above the key 17,000 points level.
"Monday was the bottom and players are now trying to make up for what they lost in the past week," said Kenichi Azuma, a strategist at Cosmo Securities, who maintained his upbeat view of the market's prospects. "From now on, players now shifting their focus to the performance of each selected firm," Azuma said, adding that the Nikkei was expected to move in a range between 17,100 and 17,500 next week.
The weakness of the yen, which boost the competitiveness of Japanese goods overseas, is also expected to help boost Tokyo shares, dealers said.
On Monday, the dollar sank to near three-month lows against the yen as speculators scaled back riskier investments funded by cheap Japanese credit, dealers said.
The Japanese currency benefited from an unwinding of so-called carry trades, whereby speculators take advantage of Japan's rock-bottom interest rates to raise cheap funds to invest elsewhere. But the dollar climbed back gradually later in the week as concerns about the prospects for the US economy eased, dealers said, noting that much could depend on the key US employment report due later Friday.
Among key local indicators to be released next week is an updated estimate of gross domestic product for the December quarter.