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Nikkei edges higher on yen, firmer China shares

Published 12/12/2010, 10:01 PM
Updated 12/12/2010, 10:04 PM
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* Nikkei up on firmness in China markets after tightening

* Shanghai, Hong Kong shares climb more than 1 pct

* But short-term technicals still indicate Nikkei overbought

By Ayai Tomisawa and Chikafumi Hodo

TOKYO, Dec 13 (Reuters) - Japan's Nikkei average climbed slightly on Monday on the yen's recent weakness and rises in Chinese shares after efforts from Beijing to cool inflation, but the Tokyo market lacked the energy to chase shares on rallies.

The Nikkei's topside was blocked by profit-taking demand as short-term technical indicators showed that Japan stocks were overbought, analysts said.

"The market is under some pressure today but Tokyo stocks remain very firm as prospects for the global economy and global shares are improving. The yen's weakness is also helping Japanese stocks," said Ryosuke Okazaki, chief investment officer at ITC Investment Partners Corp.

The benchmark Nikkei closed the morning session up 0.1 percent or 14.69 points at 10,226.64.

The broader Topix index advanced 0.2 percent to 890.05.

The Shanghai and Hong Kong markets advanced more than 1 percent on Monday after China's latest attempt to cool inflation by increasing bank reserve requirements.

"The market is watching whether there will be another tightening before the end of the year, but for the time being the Nikkei will be supported by the weaker yen," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.

The yen's recent weakness helped bolster exporters' shares to give overall support to the Nikkei.

In early Asian trade, the dollar was little changed at 83.96 yen.

Still, short-term technical trends signalled the Nikkei remained overheated, which inhibited investors form chasing Tokyo stocks strongly on rallies, analysts said.

The toraku, or up-down ratio, which measures how much the market is overheated, is at 151. A market with a figure above 120 is considered to be overheating.

The ratio is calculated by dividing the 25-day moving average of stocks that gained by the 25-day average of those that fell.

The Nikkei reached a fresh seven-month high of 10,373.70 on Friday, with strong technical resistance seen at 10,420.74 -- the level where futures and options contracts expiring in December settled on Friday.

NIKON FALLS

Nikon Corp fell 1.2 percent to 1,601 yen, extending losses after Goldman Sachs cut its rating to "sell" from "neutral" and added the stock to its "conviction sell" list on Friday. The brokerage also lowered its target share price to 1,340 yen from 1,450 yen.

Copper smelter Furukawa Co Ltd climbed 3 percent to 104 yen after copper prices rose near record highs on bullish Chinese import data and upbeat U.S. consumer sentiment that boosted the demand outlook. (Additional reporting by Antoni Slodkowski; Editing by Joseph Radford)

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