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The Nikkei average rose 0.35 percent on Friday as investors picked up laggards like Mitsubishi UFJ Financial Group and other bank shares, while a softer yen boosted auto shares such as Honda Motor Co Ltd Drug maker Eisai Co advanced 1.7 percent after it said it would buy privately held US biotechnology firm Morphotek Inc for $325 million.
After the market closed General Electric Co said it would launch a $1.14 billion tender offer for Sanyo Electric Credit Co Ltd, a Japanese leasing company whose main shareholder is Goldman Sachs Group Inc Property stocks came under profit-taking pressure after Thursday's government land price data showing Japanese land prices rose for the first time in 16 years in 2006.
"Since the global stock sell-offs, investors have been looking for a safe place to invest in, and those with high liquidity are sought as they can be easily sold," said Takahiko Murai, general manager of equities Nozomi Securities. Strong gains in pharmaceutical shares also reflected such worries, analysts said.
The Nikkei added 61.41 points to 17,480.61, the highest close since February 28. On the week, the Nikkei added 4.4 percent, the biggest weekly climb since January 2006. The broader TOPIX index gained 0.59 percent to 1,741.94. Despite the gains in the market, Tatsuo Nishimura, portfolio manager at Meiji Dresdner Asset Management, sees little upside potential going forward.
As Monday will be the last day to buy stocks and be eligible for dividend payments, Nishimura said the market may lose momentum. In addition, economic fundamentals are not as strong as he had hoped for, he said. "I feel that the economy may be entering some stalling phase as personal consumption remains weak and corporate capital spending slows down," he said. "This is a difficult time for us to choose which stocks to pick."
Trade volume slowed with 1.9 billion shares changing hands, compared with a daily average volume of 2.7 billion shares in February. Advancers outnumbered decliners 852 to 719. Bank shares, which have underperformed the TOPIX, came on the radar of investors looking for bargains. The bank subindex has fallen 5 percent so far this year as rising interest rates have not provided the profit boost that many had hoped for.
That compared with a 20 percent rise in the steel sector. Mitsubishi UFJ Financial rose 1.5 percent and Mizuho Financial Group Inc added 1.3 percent. Yasuo Yabe, director of sales at Meiwa Securities, said that after the land data the market may have started to factor in an end to deflation. "A possible end to deflation would of course be good for banks, but in a larger sense the market may have already started to take that into account," he said.
Automakers benefited from the dollar's rise above 118 yen on the view that Federal Reserve may keep interest rates on hold for some time. Honda rose 1.7 percent to 4,270 yen, while Toyota Motor Corp added 0.5 percent to 7,840 yen. Drug shares drew buyers with Takeda Pharmaceutical Co Ltd adding 2.2 percent and Astellas Pharma Inc gaining 3 percent.
A notable loser was Elpida Memory Inc which declined 2.7 percent to 4,740 yen after electronics firm NEC Corp said on Thursday it sold a 2.3 percent stake in the chip maker, reducing its shareholding to 6 percent.

Copyright Reuters, 2007

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