Japan's Nikkei share average rose 1 percent on Wednesday to its highest in six months, boosted by news that China's manufacturing sector rose to a four-month high in February although it remained in contraction territory. The HSBC flash purchasing managers index, the earliest indicator of China's industrial activity, rose to 49.7 in February from 48.8 in January.
The PMI has been below 50, which demarcates expansion from contraction, for most of the last eight months. The Nikkei closed at 9,554.00. The benchmark has faced stiff resistance at the 9,500 level for the past two sessions. Shoji Hirakawa, chief strategist at UBS, said expectations of monetary easing by major central banks would boost equities and Japanese stocks, which have a low book value, tend to outperform in such situations.
"The index is trying to break the 10,000 mark as early as March," he said, adding that if not, it would reach close to that level. The Nikkei China 50 index, comprising 50 Japanese stocks with significant exposure to China, climbed 0.8 percent after ending the morning session 0.3 percent lower. Komatsu Ltd, which sells more than 20 percent of its construction machinery in China, pared losses, up 0.6 percent to 2,425 yen. It ended morning trade lower at 2,371 yen.
Automakers extended gains after the PMI data, with Nissan Motor Co up 2.3 percent, Toyota Motor Corp adding 1.8 percent and Honda Motor Co gaining 2.1 percent. Mazda shares closed up 1.4 percent after shedding 10 percent on Tuesday on reports of the fundraising. Sources told Reuters it planned to raise up to 100 billion yen through the offering. A weaker yen also raised the appeal of exporter shares, as the dollar traded above 80 yen for the first time since August.
"The 80-yen level is extremely important for sentiment and now that it's managed to exceed that level, we'll see steady gains for equities," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities. The broader Topix advanced 1.1 percent to 825.40, with nearly 2.44 billion shares changing hands, up from 2.38 billion the previous session.
According to Thomson Reuters Datastream, the Topix carries a 12-month forward price-to-book ratio of 0.91, much cheaper than S&P 500's 1.94 times and STOXX Europe 600's 1.35. The Nikkei is up 8.5 percent this yearn on the back of strong economic data out of the United States, the European Central Bank's liquidity injection of nearly half a trillion euros and further easing steps by the Bank of Japan.
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