Japanese shares likely to extend gains

Japanese share prices look set to continue their recent recovery as investors bet on another cut in US interest rates to ward off the threat of recession, dealers said Friday. They said the dollar's recovery from two-year lows against the yen should also encourage market players to buy back shares, particularly exporters.
The benchmark Nikkei-225 index surged 791.90 points or 5.32 percent to 15,680.67 over the week to November 30. The broader Topix index of all first-section shares rose 94.50 points or 6.57 percent to 1,531.88.
"Market sentiment has turned positive since Bernanke suggested there will be another rate cut," said Hirokazu Fujiki, a strategist at Okasan Securities. "I think this positive momentum is likely to continue next week especially after players sold stocks so actively for the past few weeks," he said.
Bernanke hinted in a speech on late Thursday that the Fed may cut interest rates again next month, saying the central bank sees a high degree of uncertainty in the US economic outlook.
Fed policymakers will need to be "exceptionally alert and flexible," he said. Signs are emerging that the market's downtrend, triggered by the subprime lending crisis, may have bottomed out, some analysts said.
"I think Japanese stocks have already hit the bottom," said Tsuyoshi Segawa, an equity strategist at Nikko Securities Co.
"Stocks are expected to recover moderately toward the year-end, possibly to around 17,000 points," he said. Analysts said a weaker yen against the dollar was another factor behind the recent rebound in share prices because it is positive for exporter earnings.
The dollar recovered to the 110-yen level on Friday after falling below 108 yen, earlier, in the week amid concerns about the outlook for the US economy. Investors are also hoping that domestic economic data, including a second estimate of third-quarter gross domestic product due next week, will also allay concerns about the outlook for Asia's largest economy.
Share prices "will be able to hold firm if investors are convinced that Japan's economy is solid," said Kazuhiro Takahashi, equity chief at Daiwa Securities SMBC. "Investors will likely engage in nervous trading as they keep an eye on any signals from the United States," Takahashi added, warning that there was a risk of further declines if the Fed disappoints on interest rates.