Japan's Nikkei share average advanced 1 percent in early trade on Tuesday as index heavyweight Softbank Corp rallied after the company confirmed a $20 billion acquisition of a U.S. competitor with a loan from four banks that also benefited from the news.
Softbank bounced back 9.2 percent after losing over 20 percent since rumours of the deal emerged last Friday, while three of the four banks sources say will lend Softbank funds for the deal -- Mizuho Financial Group Inc, Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group -- gained between 1.7 and 2.5 percent in heavy trade.
"It's just clarity on the structure. People didn't know if they were going to have to pay higher than what was rumoured, they were concerned about dilution, and (Softbank CEO Masayoshi) Son came out and flat-out denied that," said a partner at a foreign hedge fund.
"But given how much it was sold, it's just a relief rally,"
Japanese equities were also given a boost after U.S. stocks moved up overnight as Citibank Inc's
The Nikkei added 87.37 points to 8,666.00 as investors picked up battered cyclical stocks that were hurt last week as investors braced themselves for disappointing earnings from companies pressured by a global slowdown, strong yen and anti-Japanese sentiment in China.
"There's been concern about the exporters and the yen continuing to be where it is but I tend to think that it's been a bit overdone," the partner said.
"A lot of people were throwing in the towel and that creates a pretty violent reaction on the downside."
The partner also said that many companies had factored in the yen staying at around 78 versus the dollar, meaning that the ongoing strength of the yen should not lead to companies cutting their forecasts further.
However, ebbing demand might. Kirin Holdings Co lost 3.3 percent after the beer and beverages maker cut its sales target for 2015 to 2.3 trillion yen, down from 3 trillion in 2006 due to a sluggish domestic market.
Yet the company also said it intends to increase operating profit by more than 16 percent over the next three years to 180 billion yen as it uses assets acquired in a buying spree to boost its bottom line.
The broader Topix added 0.8 percent to 728.76.
Stocks getting cheaper
"The Topix index has also started to seem reasonable, but investors are unlikely to go all-out on buying before companies post their profits and forecasts," said Hiroichi Nishi, equity general manager at SMBC Nikko Securities.
Many companies on the broad Topix index are now trading below book value, with an average price-to-book ratio of 0.9, according to Thomson Reuters Starmine, compared with the S&P 500's ratio of 2.2.
However, estimates from Thomson Reuters Starmine show expectations for an average negative earnings surprise from Topix companies of 1.4 percent for 2012, while an average 0.1 percent positive su r prise is expected for S&P 500 stocks.
Out of the 8 percent of companies on the S&P that have reported results so far, 58 percent have topped expectations.
The Nikkei lifted off a two-month low on Monday, rising 0.5 percent to 8,577.93 after Chinese data prompted hopes that policy could be eased further to shore up growth in Japan's biggest export market.
