Nikkei climbs 1.48 pct. buoyed by Canon buyback plan

09:16, May 27, 2011      

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Tokyo stocks rose on Thursday, with the key Nikkei stock index rebounding 1.48 percent after hitting a two-month closing low the previous day as a softer yen and Canon's announcement of a share buyback plan detracted from concerns about the global economic recovery.

Brokers said that investors were encouraged by a broad range of Japanese issues deemed undervalued and dived into riskier assets for bargains and on short covering.

Analysts highlighted the fact that the Nikkei has lost 2.5 percent during this week and that Japanese shares are currently priced around 65 percent below book value.

But while Thursday's gains technically constitute a rebound, in light of ongoing uncertainty about Japan's corporate and economic outlook following the March 11 disasters, brokers said that some gains made lacked resilience to both domestic and external cues.

"It seems like shares have reached a bottom for now, but the rebound will not be a powerful one," said Yutan Yoshii, general manager at Mitt Securities.

The U.S. Federal Reserve's plans to halt its quantitative easing program, rising debt problems in the eurozone as well as concerns monetary tightening may slow down growth in emerging economies, are all triggers waiting to weigh on Japanese shares, brokers said.

"Whether this rally lasts or not depends on external factors such the U.S. economic recovery but excessive concerns about the possibility of more immediate declines have receded," said Kenichi Hirano, a strategist at Tachibana Securities.

The 225-issue Nikkei Stock Average added 139.17 points from Wednesday to 9,562.05, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange gained 9.34 points, or 1.14 percent, to finish at 827.08.

Commodity-related issues gained on increased demand and higher settlements, with crude oil for July climbing 1.7 percent to a two- week high of 101.32 U.S. dollars per barrel in New York. Copper and gold prices also jumped adding to investors' risk appetite, market players said.

Japan Petroleum Exploration leapt 4.9 percent to 3,725 yen, helped by Mitsubishi UFJ Morgan Stanley Securities Co. raising its rating on the company to "outperform" from "neutral" and Inpex Corp. climbed 3.1 percent to 565,000 yen.

Sumitomo Metal Mining Co., meanwhile, increased 2.0 percent to 1,294 yen and JX Holdings rose 3.2 percent to close at 514 yen.

"The market is taking it positively that money is flowing to risk assets, and that's exceeding concern about the negative impact of higher commodity prices on the economy," said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co.

"Demand for commodities will continue to increase in developing countries in the medium-and long-term as the economy expands," he added.

Canon Inc. was very much in the spotlight on Thursday, having announced late on Wednesday that it would buy back 1.2 percent of its own shares, which could total as much as 50 billion yen (about 610 million U.S. dollars).

The camera and copier maker said it was planning strategic moves in the near future involving potential share swaps and strategists said the news helped buoy the sentiment of the broader market.

"Investors responded straightforwardly to Canon's share buyback plan," said Tsuyoshi Segawa, equity strategist at Mizuho Securities Co. He also said that the move inspired investors to reevaluate Japanese shares in general.

Canon closed the day up 5.8 percent at 3,850 yen.

Japanese automakers saw gains as the yen declined and on individual news.

The Japanese currency dropped to 116.05 against the euro and to 82.09 against its U.S. counterpart.

Mazda Motor surged 6.9 percent to 201 yen following Nomura Securities raising its rating on the firm's stock to "buy" from " neutral" and increased its target price to 270 yen from 235 yen.

Toyota Motor, the world's largest automaker gained 1.2 percent to 3,355 yen and the auto sector was given a boost by a Deutsche Bank analyst maintaining his "buy" advisory on Toyota, Honda and Nissan -- Japan's top-three carmakers.

Trading volume on Thursday edged up to 1.61 billion shares on the Tokyo Exchange's First Section, rising from Wednesday's volume of 1.60 billion shares, with advancing issues trumping declining ones by 1,200 to 322.

Source: Xinhua
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