* Sentiment bullish, Nikkei could test 10,000 in near term
* Financials gain after FT report on global regulation
* Unexpectedly strong Nikkei induces stop-loss buying
By Aiko Hayashi and Chikafumi Hodo
TOKYO, Nov 10 (Reuters) - Japan's Nikkei rose more than 1 percent to its highest close in more than four months on Wednesday, buoyed by financial shares after a report that most major Asian banks may be exempt from planned new global rules.
Relatively large stop-loss and options-related purchases from domestic and foreign players were triggered as the Japanese equities market surprisingly outperformed other markets such as the United States, Hong Kong and Shanghai.
"Many players who bet the Nikkei would drop are being forced to buy back Japanese shares," said Ryosuke Okazaki, chief investment officer at ITC Investment Partners.
"It appears that even Japanese institutional investors are looking for chances to buy to meet their targets for October-December as they are believed to have kept their positions uncovered because domestic shares have underperformed for a while," he said.
The benchmark Nikkei closed up 1.4 percent or 136.03 points at 9,830.52, its highest close since June 24.
Trade picked up on the Tokyo exchange's first section, with 2.21 billion shares changing hands, its highest volume in a month. Advancing stocks outnumbered decliners by nearly 4 to 1.
The Nikkei touched an intraday high of 9,842.90 -- also the high since June 24, when the Nikkei last rose above the closely watched 10,000 threshold.
But profit-taking curtailed further gains in the afternoon.
The Nikkei's advance also slowed as Hong Kong and Shanghai shares fell after industry sources told Reuters that China's central bank has ordered some banks to lift their reserve ratios by 0.5 percentage points.
Underlying sentiment for the Nikkei remained bullish as many participants expected it to test 10,000 in the near term, but some players remained cautious.
Bank shares surged after the Financial Times, citing people briefed on the agenda for the G20 summit this week in Seoul, said officials have decided that regulators should focus on big banks with global operations, exempting domestically focused lenders, such as those in China and Japan, from stricter regulations.
"Bank shares were bought quite heavily reflecting the FT report, boosting overall sentiment," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.
"But can the market be all that happy and buy bank shares aggressively just because the FT article said regulators should focus on big banks with global operations? This would mean that Japanese banks are not global players, so if this is true then we can't be all that positive."
But people close to the Financial Stability Board, which is tasked by the G20 with implementing its regulatory pledges, said that they had not decided which institutions would be classified as "systemically important financial institutions."
BANKS HIGHER
Still, the rise in bank shares helped the broader Topix, which rose 1.6 percent to 852.98, outperform the Nikkei.
"The Topix is outperforming the Nikkei due to the strength in financials, but an upbeat mood was already in place ahead of the special quotation scheduled this week," said Takashi Ohba, a senior strategist at Okasan Securities.
The market's rise accelerated after active stop-loss buy orders were triggered after the Nikkei broke through 9,750. A series of options-related orders had been rumoured to be lined up around that level ahead of the "SQ" this week, Ohba said.
The closely watched settlement price, known in Japan as the special quotation or "SQ", is calculated from the opening prices of the 225 shares on the Nikkei average on the second Friday of the month.
It is calculated monthly for options and every three months for futures.
Among financial shares, Mizuho Financial Group soared 7.6 percent to 127 yen. Sumitomo Mitsui Financial Group jumped 5.9 percent to 2,512 yen and Mitsubishi UFJ Financial Group rose 4.2 percent to 393 yen.
Nomura Holdings advanced 4.4 percent to 447 yen.
A firmer dollar supported Japanese exporter shares. The greenback was up 0.1 percent at 81.81, moving away from its all-time low of 79.95 yen.
Canon Inc rose 3.1 percent to 3,995 yen and Advantest climbed 2.4 percent to 1,629 yen.
Nippon Telegraph and Telephone Corp, Japan's largest telephone company, jumped 4 percent to 3,900 yen after it announced on Tuesday it would cancel 7.97 percent of its shares outstanding, worth 470 billion yen at the current market price, on Nov. 15.
But Acom Co dropped 3.6 percent to 810 yen after Japan's biggest consumer lender by market value said on Tuesday that it would sink deeper into the red this financial year, hit by mounting costs from refunding overcharged interest to borrowers. (Editing by Chris Gallagher)