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Nikkei hits 2-1/2-week high on China hopes, soft yen spurs exporters

Traders also suspect buying by fund managers as books close for the fiscal year-end

Reuters Tokyo
Last Updated : Mar 31 2014 | 11:25 AM IST
Japanese shares climbed 1 percent to a 2-1/2-week high on Monday morning on growing hopes China would offer stimulus measures to bolster its sagging economy, with exporters leading the way on a softer yen.

Traders also suspect buying by fund managers as books close for the fiscal year-end, though the benchmark Nikkei is still expected to post its first quarterly decline in 1-1/2 years.

The benchmark Nikkei advanced to 14,839.54 at the opening, its highest level since March 13, and was last traded at 14,808.35, 0.8 percent higher on the day.

"Investors' risk-off stance has receded following U.S. data and China hopes," said Naoki Fujiwara, chief fund manager at Shinkin Asset Management.

China's Premier Li Keqiang on Friday sought to reassure jittery global investors that Beijing was ready to support the cooling economy, saying the government had the necessary policies in place and would push ahead with infrastructure investment.

Investors were also encouraged by data showing a rise in US consumer spending in February, joining a string of upbeat numbers that suggested the world's biggest economy was picking up solid momentum.

Exporters, particularly automakers, fared well on the weaker yen, with Nissan Motor Co Ltd, Honda Motor Co Ltd , Mazda Motor Corp, Fuji Heavy Industries Ltd, Mitsubishi Motors Corp gaining between 2 and 4.1% in heavy trade.

The yen slipped to 102.98 yen to the dollar on Friday, its weakest level in two weeks. It was last at 102.80 yen.

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"Foreign speculators are buying the futures on expectations that fund managers would do some window dressing," Shinkin Asset's Fujiwara added, referring to the buying ahead of the new fiscal year starting on Tuesday.

Still, on the quarter, the Nikkei was down 9 percent since the start of the year and is headed for its first quarterly decline in 1-1/2 years, hurt by a slowing in Japan's economy, worries over the tapering of the U.S. Federal Reserve's stimulus and China's economic woes.

The market has also been pegged back by concern that consumption will be crimped by Tokyo's sales tax hike to 8 percent from 5% on April 1.

Still, many see the Nikkei's pullback as a necessary correction after a 57 percent rally last year.

"While Japan's performance has been negative since the start of 2014, we view the current phase as a healthy consolidation phase preparing the stage for a possible up-side breakout," wrote Jesper Koll, head of Japanese equity research at J.P.Morgan, in a note to clients.

The market largely shrugged off an unexpected fall in Japan's factory output for February.

Aeon Co Ltd jumped as much as 3.3 percent after the Nikkei newspaper said the supermarket chain operator will launch low-cost smartphone services on April 4 priced at less than half the fees major domestic mobile carriers typically charge.

The broader Topix added 0.8 percent to 1,196.04 in moderate trade, with trading volume at 28 percent of the full daily average for the past 90 days.

The JPX-Nikkei Index 400, a recently introduced gauge comprised of companies with a high return on equity and robust corporate governance, rose 0.9 percent to 10,833.98.

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First Published: Mar 31 2014 | 8:15 AM IST

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