The Nikkei rose 0.14 percent on Wednesday as shares of Japan's three largest banks extended gains on profit prospects this year but Nippon Sheet Glass Co Ltd dropped on a lower forecast, curbing the overall gains. Acom Co and other consumer lenders surged after official filings showed that a US investment firm increased its holdings in the firms.
"Earnings results prompted investors to rethink about bank shares," said Tsuyoshi Nomaguchi, strategist at Daiwa Securities Co Ltd's Japanese equity research, who added that both bank and small-cap shares have been a drag on the overall Tokyo market and now are being bought as they look discounted.
"But not everyone is chasing after bank and small-cap shares. Earnings outlook start-up companies remain unclear and earnings at banks are not growing as much as anticipated despite some growth in lending," he added. The Nikkei added 25.07 points to 17,705.12, while the broader TOPIX index rose 0.49 percent to 1,740.08. Trade was the most active in a week, with 2.18 billion shares changing hands on the Tokyo exchange's first section. Decliners beat advancers by a ratio of nearly two to one.
After the market closed, US hedge fund Steel Partners said it would launch a tender offer for all the shares of Japanese circular saw maker Tenryu Saw Manufacturing Co Ltd it does not already own.
Junichi Misawa, senior fund manager at STB Asset Management, said bank shares tend to play a key role in investors' portfolios as the market capitalisation of all the bank shares, including regional and mega banking groups, accounts for 12 percent of the Tokyo Stock Exchange's first section. That's second only to electronics shares, which account for 14 percent, he said.
"Bank shares tend to move substantially and make investors think about the risk of not owning them," he said. Lenders Mitsubishi UFJ Financial Group Inc, Mizuho Financial Group Inc and Sumitomo Mitsui Financial Group Inc climbed as investors bet the banks will be able to mount an earnings recovery this year.
Mitsubishi UFJ, Japan's largest lender, rose 3.7 percent to 1.41 million yen while Mizuho, Japan's second-largest bank, jumped 5.5 percent to 847,000 yen. Japan's banking sector has lost more than 20 percent since hitting a seven-year high in April last year, slumping on concern about a legal crackdown at their affiliated consumer credit companies.
Some investors also appeared to have set their eyes on the consumer lender sector. The recent official filings showed that US investment firm Brandes Investment Partners raised its stake in Takefuji Corp and Acom. Takefuji jumped 6.9 percent and Acom surged 11.5 percent.
Among losers was Nippon Sheet Glass which ended down 13.1 percent at 585 yen after the company chopped its earnings forecast for the year ended in March partly because of provisions against possible fines related to price-fixing allegations in Europe. Steel and non-ferrous shares, which had led the market, also came under profit-taking pressure with Nippon Steel Corp down 2.2 percent and Sumitomo Metal Mining Co Ltd falling 2.9 percent.