Japan's Nikkei stock average edged 0.4 percent higher on Wednesday as investors picked up some battered shares, with wireless carrier Softbank climbing after UBS Securities raised its target price. Oil company Showa Shell Sekiyu gained 6.1 percent on its plans to start a solar power project in Saudi Arabia with Saudi Aramco.
The Nikkei closed higher after finishing the morning slightly lower, as investors drew comfort from the firmness of other Asian stock markets after being nervous about the Nikkei's 2.8 percent decline the day before. But its gains were limited in the face of bearish technical signals and uncertainty ahead of the end of the US Federal Reserve's policy meeting later on Wednesday.
"Since the Nikkei was near the key 9,500 level, that helped create a mood for investors to try some bargain hunting," said Mitsushige Akino, chief fund manager for Ichiyoshi Investment Management. The Nikkei rose 40.71 points to 9,590.32, while the broader Topix rose 0.1 percent to 902.46. Investors are keenly awaiting the Fed's policy decision statement and are nervous about anything that could hint at interest rate hikes.
"The ideal result is for no change in policy and for the Fed to merely say that they might think about interest rates again later in the year, after the economy improves," said Tomomi Yamashita, a fund manager at Shinkin Asset Management. Traders and analysts played down the impact of a newspaper report saying that Japanese Finance Minister Kaoru Yosano's political support group had accepted what appeared to be illegal donations from a dummy organisation. Yosano denied any wrongdoing.
The issue by itself is unlikely to lead to any sharp sell-off in Japanese shares, said Ichiyoshi Investment's Akino. This is partly because investors are already mindful of the possibility that the ruling Liberal Democratic Party could be ousted from power by the opposition Democratic Party in a general election due within months, Akino said. "But if this were to lead to the timing of the election being brought forward, or to the immediate resignation of (Prime Minister Taro) Aso, that could lead to some turmoil and things would be different," Akino added.
Even though the Nikkei has held above 9,500, bearish signals are showing up on technical charts. The Nikkei earlier this week fell below its 25-day moving average. In addition, the 5-day moving average is nearly at the 25-day moving average and could cross below it soon, a move known as the "Death Cross" and which is often a bearish signal. A similar pattern appeared in late April, where an apparently imminent Death Cross was avoided at the last moment and instead signalled the bottom of a brief dip.
A break below 9,500 could set off a drop to 9,000, where the 200-day moving average currently comes in. "Falling down this far would signal quite an adjustment, and recovery could take some time," said Koichi Ogawa, chief fund manager at Daiwa SB Investments. Oil fell 0.8 percent on Wednesday after climbing 3.5 percent the day before, but energy shares were higher, with Nippon Oil rising 2.6 percent to 551 yen and Inpex rising 1 percent to 723,000 yen.
Showa Shell Sekiyu shares jumped 6.1 percent to 1,043 yen. Wireless carrier Softbank Corp climbed 6.4 percent to 1,814 yen after UBS Securities raised its 12-month target price for Softbank's shares to 2,400 yen from 1,960 yen.
Shares of Shinsei Bank Ltd fell 5.2 percent to 145 yen after Credit Suisse cut its rating on the mid-sized lender to "neutral" from "outperform", saying it was unlikely there would be any positive catalysts to boost the stock over the near-term. Advancing shares outnumbered declining shares 816 to 750. Trade lightened, with 2.1 billion shares changing hands on the Tokyo exchange's first section compared to last week's daily average of 2.5 billion.