Nikkei edges up

Japan's Nikkei average rose 0.1 percent on Wednesday, as a surge in banking shares on a brighter outlook for the US financial sector offset profit-taking in other stocks after the benchmark's recent rally to 18-month highs. Wells Fargo Securities raised its rating on large-cap US banks on Tuesday, citing more clarity on asset-quality trends, and this lifted the banking sector on Wall Street.
But the yen's regaining of some ground after hitting a seven-month low against the dollar this week, was encouraging investors to take profits in exporters and shifting into sectors that have lagged the broader market. The Nikkei edged up 10.51 points to 11,292.83 on Wednesday. It hit an 18-month intraday high of 11,408.17 earlier this week.
The broader Topix index rose 0.5 percent to 995.54. The Nikkei's relative strength index (RSI) has fallen slightly from a peak of 76 hit earlier this week but still held above 70, which is considered overbought territory. But the Nikkei's trend looks bullish on daily Ichimoku charts. Volume rose, with nearly 2.4 billion shares changing hands on the Tokyo exchange's first section, the highest in about a month.
Advancing shares outnumbered declining shares by 2 to 1. Chemical maker Sumitomo Chemical Corp surged 5.5 percent to 480 yen and was the top percentage gainer among shares in the benchmark Nikkei 225 index, after Mitsubishi UFJ Securities upgraded the stock's rating to "1" from "2" and raised the six-month to 12-month target price to 700 yen from 400 yen.
Mitsubishi UFJ Securities said in a research note that it sees upside given Sumitomo Chemical's medium-term plan, which targets operating profit of 190 billion yen ($2 billion) in fiscal 2012/13, although it added that the plan's targets look challenging.
Fujitsu Ltd fell 1.4 percent to 616 yen on news that former president Kuniaki Nozoe will file suit against the Japanese IT services firm unless its auditors act to resolve his claim that he was improperly forced to resign, according to his lawyer.
The Bank of Japan's decision to keep monetary policy unchanged was in line with market expectations and had little impact on the stock market. Banking shares drew support from buying interest among overseas investors, said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities, who said some are looking to shift out of sectors such as retail and into banks and communications.
As of Tuesday, the banking sub-index had been the second-worst performing sub-index over the past year, having slid 4.6 percent. Only the air transport sector fared worse, having tumbled 53 percent, while the Nikkei rose 27 percent. The price-to-book ratio for Mizuho Financial, for example, is 1.32 and that of No 3 bank Sumitomo Mitsui Financial Group 1.79. Top lender Mitsubishi UFJ Financial Group has a price-to-book ratio of 1.02.
By contrast, printer and digital camera maker Canon Inc is 2.21 and chip tester maker Advantest Corp is 3.01. Sumitomo Mitsui Financial Group rose 4.2 percent to 3,260 yen and Mizuho Financial Group gained 2.2 percent to 187 yen. Mitsubishi UFJ Financial Group rose 2.7 percent to 503 yen. The banking subindex rose 2.8 percent and was the biggest gainer among the subindexes, at one point hitting its highest level in more than 6 months.