The Nikkei average rose on Friday to round off a week of gains as foreign investors scooped up battered shares, but their buying could ebb next week on persisting concerns about a crippled nuclear plant and power cuts.
Foreign investors' net buying of Japanese shares reached a record high last week, the week after a devastating earthquake hit northeastern Japan, Ministry of Finance data showed, and traders say their buying continued this week.
Overseas investors bought a net 891 bln yen ($11 bln) in Japanese stocks in the week of March 14-18, the highest since records began in 2005.
Some analysts said foreign buying may continue before the ex-dividend date on March 28 but others were worried that their buying — the main driver of the market rebound since last week — may peter out soon.
“Many companies downgraded their earnings estimates this week and some halted dividends for this year,” said Hiroyuki Fukunaga, chief executive of trading information provider Investrust. “Both trends will likely continue next week, putting the market under pressure and souring sentiment.”
The benchmark Nikkei ended the day up 1.1% or 101.12 points at 9,536.13, helped by broad optimism towards the global economy and a rise in U.S. shares ahead of forthcoming earnings reports.
On the week, the Nikkei gained 3.6%, consolidating around 9,500 in a narrow 200-point range as investors cautiously watched developments at the quake-crippled Fukushima nuclear plant.
The broader Topix index gained 0.4% to 857.38 on the day, for a weekly gain of 4.4%. On Friday, advancing shares outpaced declining ones by 922 to 638.
OVERSOLD SHARES
Analysts also said the overall market got a lift as investors bought on dips, with some technical indicators showing that Japanese stocks are heavily oversold.
The Nikkei is now trading about 6% below its 25-day moving average at 10,116.
“Also, more than 60% of stocks on the Tokyo stock exchange's main board are trading below their book value, so it's time to buy back shares while watching problems at the nuclear plant carefully,” said Hiroichi Nishi, general manager at Nikko Cordial Securities.
At the end of the week, the Nikkei's price-to-book ratio stood at 1.1, roughly half that of the U.S. S&P 500 and Hong Kong's Hang Seng benchmark.
About 3.15 bln shares changed hands on the first section of the Tokyo Stock Exchange on Friday, still above the average of the past three months. Still, trading volume appears to be declining after peaking on Tuesday last week, when the Nikkei plunged about 10%.
Domestic institutional investors, who will end their business year on Thursday next week, are unlikely to turn up as buyers at least until March 31 and possibly longer as they wait for more information about damage from the quake to emerge, some traders said.
Investrust's Fukunaga said the Nikkei will likely move between 9,000 and 9,600 over the next five sessions.
But some market players also said the market could test the 200-day moving average, which stood at 9,822 on Friday.
“(In the medium term), psychological support is seen around 9,000, while there may be more room to rise as far as 9,800, which is near the 200-day moving average,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
Construction equipment makers rose on expectations of reconstruction-related demand as well as higher resource prices. Komatsu Ltd gained 4.7% to 2,795 yen.
Shares in food processor Nichirei jumped 5.7% to 355 yen after the Nikkei business daily reported it would join forces with the Itochu group in the frozen-food business, taking on most of the lost production at a tsunami-damaged factory operated by an Itochu subsidiary in northern Japan.
Sony Corp gained 3.3% to 2,634 yen after Deutsche Securities raised its rating on the stock to “buy” from “hold” on expectations of rising sales in its chip and gaming businesses.
