Nikkei climbs before BOJ nominees' confirmation; real estate stocks lead

Japan's Nikkei average climbed 1.2 percent on Thursday, snapping a two-day losing streak, as real estate companies rebounded ahead of the expected confirmation of a new leadership team for the Bank of Japan.

Japan's lower house approved Haruhiko Kuroda as the next governor of the Bank of Japan and Kikuo Iwata and Hiroshi Nakaso to serve as the BOJ's two deputy governors on Thursday. They are expected to be endorsed by the upper house on Friday.

The new team is expected to take bolder policy measures to boost the ailing economy.

The Nikkei spurted in the last 30 minutes of trading to close at 12,381.19 points, after facing resistance at its five-day moving average at 12,313.67 earlier in the session. However, the index stopped short of a 54-month intraday high of 12,461 hit on Tuesday.

"Overseas clients are very bullish. We could see consolidation at this level right now as the FX trade is priced in but we are still at 96 (yen to the dollar)," a Tokyo-based trader said.

"It's up to the corporate sector to deliver (growth)," he said, adding that upbeat company earnings guidance for the fiscal year that will start in April could be the next catalyst to drive the market higher.

Betting on Prime Minister Shinzo Abe's push to drag the economy out of deflation, foreign investors were net buyers of Japanese equities for the 17th straight week, the longest such run since early 2006 when reformer Junichiro Koizumi was prime minister.

Foreign investors bought 1.12 trillion yen in the week through March 9, their largest net buying since the Ministry of Finance began collecting the data in 2005. They bought a total of 5.36 trillion yen in the past 17 weeks, versus 5.80 trillion in their 19 straight weeks of net buying during the Koizumi era.

The benchmark Nikkei has rallied nearly 43 percent since mid-November, bolstered by a weaker yen after Abe pursued bold reflationary policies to reignite the economy and pressed the central bank to take more aggressive easing measures.

Still, some foreign investors remain sceptical that Abe's policies will be any more successful than failed measures adopted by his predecessors.

"Many investors have hurriedly moved from light to neutral in their allocations to Japanese equities and are debating the approach to real estate and bonds," said Andrew Milligan, head of global strategy at Standard Life Investments.

"We would still caution with 'caveat emptor'. Japan has seen a long series of attempts to turn the economy around. Historically, it has been right to doubt just how sustained any Japanese policy initiatives will prove to be," Milligan said.

RETAIL PUNTERS

But Japanese retail investors have got in the act.

Jun Yunoki, an equity analyst at Nomura Securities, said their trading in Japanese equities reached 24.6 trillion yen in February, the highest monthly total since October 2007.

"Retail investors tend to lag other investors, so I think there is room for them to buy more," Yunoki said.

When retail investors start to pile in, it is usually a signal that the market is likely to peak. But Yunoki said it was too early to say whether the Nikkei has hit the top of its near-term range, adding that retail players who do not borrow for margin-trading are still net sellers.

The real estate sector, which will benefit from Abe's reflationary policy, jumped 4.9 percent on Thursday as the best sectoral performer ahead of Kuroda's confirmation.

But Seiko Epson Corp sank 4.2 percent after the printer maker cut its full-year dividend outlook for the business year ending March, citing weaker sales.

Nintendo Co shed 2.5 percent after a U.S. federal jury in New York found the video game company infringed an inventor's 3D display technology patent with its handheld 3DS videogame system.

The broader Topix index rose 0.7 percent to 1,038.17 in thin trade, with 2.86 billion shares changing hands, its lowest level in nearly two weeks. Last week's average daily volume was 3.44 billion shares.

Hiroyuki Fukunaga, the chief executive of Investrust, said the lower volume indicated the stock market was levelling off.

"The market lost some momentum this week, some investors are unwinding half of their bets and are watching the exchange rate and whether U.S. indices can maintain the highs."

Japanese equities carry a 12-month forward price-to-earnings ratio of 13.5 after steadily climbing from a near four-year trough of 10.4 in June last year, though that is still below its 10-year average of 16.3, data from Thomson Reuters Datastream showed.