Nikkei rises as investors buy ahead of dividend deadline

Japan's Nikkei rose as investors picked up stocks ahead of Tuesday's deadline to qualify for mid-term dividends, but gains were capped on global growth fears, fed by weak German business sentiment and lower earnings forecast by US industrial bellwether Caterpillar Inc.

Companies such as consumer electronics maker Panasonic Corp, Toyota Motor Corp and consumer credit firm Credit Saison Co Ltd were in demand as they offer a mid-term payout to investors that hold the stock as of Tuesday.

But Japan Airlines slumped 8.7% to 3,395 yen, dropping further below its initial public offering price of 3,790 yen, as retail investors offloaded the stock on concerns about flight cancellations to China amid anti-Japan protests there over a territorial dispute.

It was the most-traded stock on the main board by turnover.

The Nikkei added 0.3% to 9,091.54, facing resistance at its five-day moving average of 9,118.00.

"The dividend seekers are driving gains, and there are also some investors desperately trying to keep the benchmark above 9,000 before the end of the first half of the financial year on Friday," said Hideyuki Fukunaga, CEO of fund manager Investrust.

Panasonic, Toyota and Credit Saison rose between 1.1 and 2.6% as they were among the roughly 55% of Topix companies with a dividend registration deadline of Tuesday.

Sony Corp, which is also going ex-dividend on Wednesday, added 0.2%. After the bell, credit ratings agency Standard & Poor's downgraded Sony's debt rating by one notch to BBB, the second last grade before "junk" rating, saying the company's earnings in this fiscal year would remain slow.

The broader Topix index advanced 0.5% to 757.66, with nearly 1.75 billion shares changing hands, up f rom Monday's 1.41 billion but down from last week's average of 1.85 billion.

"I've been aggressively shorting machinery and construction names for the past few days and now Caterpillar has really hosed down investors' hopes," a trader at a foreign bank said.

Construction machinery makers Komatsu Ltd and Hitachi Construction Machinery Co Ltd  both lost 1% after Caterpillar, the world's largest earth-moving equipment maker, cut its 2015 earnings forecast.

Index heavyweight Fanuc Corp <6954.T> shed 3.4% after Nomura downgraded its rating on the industrial robot maker to 'neutral' from 'buy' as the stock looked less attractive in the near-term amid weak machine tools demand in China.

Adding to concerns of sputtering global growth, German business sentiment dropped in September to its lowest since early 2010, suggesting the euro zone's largest economy is succumbing to the downturn despite the European Central Bank's efforts to safeguard the currency bloc by bringing down highly indebted countries' borrowing costs.

Investors demand for Nikkei call options outpaced demand for put options on Tuesday, however. Societe Generale analysts said most popular call options on the Nikkei with an October maturity had a strike price at 9,250, a 1.7% upside from Tuesday's close.

The next most-traded was a call option at 9,500, followed by a put at 8,750 and another put at 8,500, they said.

The Nikkei is up 7.5% so far this year, trailing a 15.8% rise in the US S&P 500 and a 12.3% gain in the pan-European STOXX Europe 600.

"The reason that we are getting such a low turnover at the moment is that people are having trouble in deciding between the possible outcome of the horse trading in the ECB, the US election, the Japanese election, the US fiscal cliff ... and just how bad things are in China and the clash between Japan and China," said Nicholas Smith, Japan strategist at CLSA.