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CORRECTED - CORRECTED-Nikkei extends rally, hits fresh 5-month high

Published 11/21/2010, 10:13 PM
Updated 11/21/2010, 10:16 PM

(Corrects paragraph 14 to ...11,000..., not 10,100)

* Pre-open orders via foreign brokers tilted towards buying

* Talk of overseas buying of financials, blue-chips -trader

* Signs of possible shift into equities from bonds -analyst

By Masayuki Kitano

TOKYO, Nov 22 (Reuters) - Japan's Nikkei share average rose 0.9 percent and hit a fresh five-month intraday high on Monday, supported by news of a bail out for Ireland, although gains were limited by profit-taking interest after a recent rally.

The Nikkei gained 3 percent last week and has climbed more than 9 percent so far in November, partly due to short-covering and year-end portfolio balancing by overseas investors.

The yen's recent slip off a 15-year high against the dollar struck earlier in November has also helped give a boost to the Nikkei, which extended gains on Monday to hit a five-month intraday peak of 10,136.09.

"The image I have is of the Nikkei rising without much fuss toward levels around 10,200. But a rise beyond 10,200 will likely be difficult unless there are some fresh positive factors," said Nagayuki Yamagishi, investment strategist at Mitsubishi UFJ Morgan Stanley.

After shedding some of its gains, the benchmark Nikkei average stood at 10,108.60 for a gain of 0.9 percent on the day.

The broader Topix index rose 0.6 percent to 874.70.

Technicals have brightened after the Nikkei rose above resistance at the 200-day moving average last week for the first time since May. The next upside target is its June high of 10,251.90. After that a 61.8 percent retracement of its April to September sell-off lies at 10,410.49.

Shares in Hitachi Ltd gained 1.5 percent to 403 yen after Britain's Sunday Times newspaper said a consortium of Hitachi and British infrastructure firm John Laing are preferred bidders on a contract to replace Britain's ageing intercity express trains.

The replacement will cost 7.5 billion pounds ($11.98 billion), the paper said.

The EU and IMF agreed on Sunday to help bail out Ireland with loans to tackle its banking and budget crisis in a bid to protect Europe's financial stability.

Besides the news on Ireland, talk of overseas buying of financial shares and blue-chips helped lend support to Tokyo shares, said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

Orders for Japanese stocks placed through 10 foreign securities houses before the start of trade on Monday, totalled net buying of 3.9 million shares.

Kuramochi added, however, that there was also some profit-taking interest in the market ahead of a Japanese national holiday on Tuesday.

"It seems there is a good chance that we will see the Nikkei move roughly around the 10,000 level for a while. But whether it will head toward 10,500 or 11,000 is a different question," Kuramochi said.

Among losers, shares of Japan's largest property-casualty insurer, MS&AD Insurance Group Holdings Inc, plummeted 8.7 percent to 1,938 yen after the company revised its full-year net profit forecast to 40 billion yen ($479 million) from the previous estimates of 51 billion yen.

It booked worse-than-expected earnings on Friday for the April-September first half of the current financial year. (Additional reporting by Antoni Slodkowski; Editing by Joseph Radford)

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