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Nikkei at 8-mth high as property, financials shine

Published 01/12/2011, 09:38 PM
Updated 01/12/2011, 09:40 PM
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* Nikkei up 0.6 pct by midday

* Portuguese bond sale eases sovereign debt worries

* Easing European fiscal worry boosts appetite for equities

* Property, financials lead advance for 2nd straight day

By Antoni Slodkowski

TOKYO, Jan 13 (Reuters) - The Nikkei average rose to an eight-month intraday high for a second straight day on Thursday, after a successful bond auction in Portugal eased fears about the euro zone's debt crisis and lifted European and U.S. shares.

Financials, which led Wednesday's advance, extended gains as foreign investors continued adding underweight banking stocks to their portfolios. Mitsubishi UFJ Financial Group, Japan's biggest bank by assets, gained 1.5 percent.

The property sector was also among the top gainers, adding 2.2 percent, as foreign funds piled into real estate shares supported by the Bank of Japan's asset buying scheme and as vacancy rates in first-class buildings in Tokyo fell in the October-December quarter.

The property sector has gained around 20 percent since the scheme was launched in October, outperforming the Nikkei's 13 percent rise over the same period.

"The strong bond auction in Portugal has calmed the markets and with no major negative factors in sight, foreign funds continue buying lagging banking and property shares," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

By the midday break the benchmark Nikkei was up 0.6 percent or 67.78 points at 10,580.58. Its immediate resistance looms at the May 13, 2010, high of 10,638.23. The next target eyed by investors is the 10,847.90 level recorded on May 6.

Trade was active with around 1.1 billion shares changing hands on the Tokyo Stock Exchange's first section by the break, with the day's total likely to be in line with last week's average volume of 2.0 billion shares.

The broader Topix added 0.7 percent to 935.83.

"Foreigners are buying property, encouraged by the BOJ's scheme and because they seem cheaper compared to surging property shares in China," said Akino, who predicts foreign buying will continue until at least June, provided that exchange rates remain steady around current levels.

The banking sector, which has gained 25 percent since November, is still considered undervalued as its price-to-book ratio stands at around 0.7, underperforming the average PBR of 1.2 for the Nikkei 225 components. A share is seen as undervalued if the PBR is below 1.0.

Banks are also attractive due to their high dividend yields, now at an average 2.8 percent, compared with 1.6 percent for Nikkei shares as a whole.

With the Nikkei having started 2011 on a very strong note and gaining around 3.5 percent, investors said some profit-taking will likely emerge soon due to the market's overheating.

WAITING FOR SPAIN

"The upside will also be limited today as traders wait for the Spanish bond sale," said Yumi Nishimura, a senior market analyst at Daiwa Securities Capital Markets.

Spain is likely to pay a premium to sell up to 3 billion euros ($3.94 billion) of 5-year bonds on Thursday as it faces jittery debt markets for the first time this year

Resource and energy shares posted strong gains as oil hovered around 27-month highs, with $100 a barrel looming for the first time since 2008 and as gold prices rose to a one-week high on Wednesday.

Inpex Corp., Japan's top oil and gas developer gained 2.2 percent, while traders rose. Marubeni Corp, Japan's No.5 trading house, and No.4 Itochu Corp both climbed 2.3 percent. The mining sector was the second-best performing on the Nikkei, adding 2 percent.

Shares of Chuo Mitsui Trust Holdings, rose 5 percent and Sumitomo Trust & Banking Co gained 4.7 percent in heavy trade, after the Nikkei business daily said that the entity to be created in April by merging the two firms is considering a dividend payout ratio of 30 percent.

The firms were the two biggest percentage gainers on the Nikkei 225. (Additional reporting by Ayai Tomisawa; Editing by Michael Watson)

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