Nikkei rebounds as yen retreats, Dubai debt fears ease

17:56, November 30, 2009      

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Japan's 225-issue Nikkei Stock Average recovered ground lost last Friday as previous fears regarding Dubai's debt problems, that sent shock waves through global equity markets, were allayed Monday on news that the central bank of the United Arab Emirates would provide extra liquidity if necessary.

Despite markets in the UAE being closed for a four-day holiday, investor sentiment was optimistic Monday as brokers indicated the Nikkei had been oversold last week as investors overreacted to the Dubai debt issue.

Financial issues rebounded, as did exporter and tech-shares, commensurate with the yen's retreat from 14-year highs against the dollar on Friday. The key benchmark Nikkei climbed 264.03 points to close at 9,345.55 on Monday.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange was up 3.6 percent to 839.94.

Global markets were in a state of shock last Friday as the partly government-run company Dubai World -- a conglomerate that owns one of the United Arab Emirates' biggest property developers, asked for the repayment of 60 billion U.S. dollars in debt, to be suspended for six-months until May 2010.

However investor panic subsided following news on Sunday that the central bank of the United Arab Emirates (UAE) said it would provide banks with extra liquidity. The liquidity will be available to all UAE banks, as well as foreign banks operating in the Emirates, reports stated. The bank added that the banking system in the UAE was more sound and liquid than a year ago.

Neighboring Abu Dhabi also helped calm nervous investors by saying it will "pick and choose" how to assist Dubai.

"We will look at Dubai's commitments and approach them on a case-by-case basis," an Abu Dhabi government official said.

"It does not mean that Abu Dhabi will underwrite all of their debts," he added.

"There's a growing view in the market that places such as Abu Dhabi could help out Dubai, and that Dubai's debt problems might turn out to be temporary," said Fumiyuki Nakanishi, manager at SMBC Friend Securities.

Diversified and commercial banking issues gained ground on Monday as short-covering parried the losses made Friday on concerns over equity financing, sparked by Mitsubishi UFJ Financial Group Inc., and the Dubai crises, which also weighed on domestic financial issues.

Japan's top-lender Mitsubishi UFJ Financial Group Inc. surged 8.53 percent to 482 yen and Mizuho Financial Group Inc. leapt 9.45 percent to 162 yen. Mitsui Financial Group Inc. also shot up 8.77 percent to close the day at 2,850 yen.

Exporter and tech-shares were elevated on Monday as the yen dipped against the dollar following a 14-year high on Friday. The dollar recovered to the upper 86-yen level from Friday's crippling drop to upper 84-yen levels.

Japan's automakers gained Monday, despite reports from Japan Automobile Manufacturers Association (JAMA) released Monday afternoon that revealed production and exports had significantly dropped in Oct. from levels seen at the same time a year ago.

JAMA's report showed that production was down 19.1 percent and exports had slumped 22.1 percent in Japan, compared to figures at the same time in 2008.

However, investor sentiment grew as the yen retreated and Toyota Motor Corp. climbed 4.24 percent to 3,440 yen and Mazda Motor Corp. also closed up 5.74 percent at 184 yen. Mitsubishi Motors Corp. advanced 4.46 percent to 117 yen and Nissan Motor Co. Ltd. gained 3.47 percent to 626 yen. Honda Motor Corp. gained 1.50percent to 2,700 yen and Suzuki Motor Corp. ended Monday in positive territory, closing up 2.86 percent at 2,050 yen.

Brokers pointed towards investor panic last Friday causing shares to be oversold and as the yen retreated against the dollar on Monday profits made abroad maintain a higher yield when repatriated.

Hence optimistic investor sentiment spurred the advance of tech-shares with Sony Corp. climbing 2.65 percent to 2,325 yen and Sharp Corp. gaining 3.67 percent to 988 yen. Panasonic Corp. gained 4.12 percent to 1,111 yen and Canon Inc. advanced 4.06 percent to close at 3,330 yen at the 3pm bell.

Japanese real estate and commercial property developers made significant gains Monday with Sumitomo Realty and Development Co. Ltd. one of the day's biggest advancers, surging 9.12 percent to 1,495 yen. Heiwa Real Estate Co. Ltd. climbed 5.51 percent to 268 yen and Mitsui Fudosan Co. Ltd. shot up 7.97 percent to 1,490 yen. Residential housing company Daiwa House Industry Co. Ltd. also gained ground on Monday, rising 5.33 percent to close at 869 yen.

However according to Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities, the Nikkei's gains were likely to slow as it neared 9,600, with investors opting to lock in profits towards the year-end. Yamagishi also pointed to the market, inevitably, needing to look for fresh cues.

"Markets are also looking to U.S. indicators for clues, especially data on the Christmas shopping season, which should start to become clearer as the week goes on," he added.

According to reports following one of the U.S.'s busiest consumer spending weekends (after Thanksgiving and ahead of Christmas), U.S. shoppers are spending significantly less per person than the same time last year, in spite of retailers slashing prices on the high streets.

Trade was active on Monday with some 2.5 billion shares changing hands on the Tokyo exchange's First section, above last week's daily average of around 2 billion.

Advancing shares outnumbered declining ones by 11 to 1. 

Source: Xinhua
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