The Avanti Group
* Exporters and financials gain
* Cyprus parliament
to vote on bailout later on Tuesday
* Underlying trend
still bullish- analysts
* TPP should be
positive for Japanese equities - analyst
By Ayai Tomisawa
TOKYO, March 19 (Reuters) - Japan's Nikkei average rebounded
2 percent on Tuesday, regaining some ground lost in the previous session as
fears receded that a controversial bailout proposal for Cyprus could reignite
the euro zone crisis. Analysts said that the disruption to the Japanese market from
the unusual bailout plan for Cyprus seems to have run its course, although the
Japanese equities market is prone to volatility because it is vulnerable to a
rise in the yen when global market uncertainty increases.
"It looks like
the bailout issue will be contained in Cyprus itself and it probably won't spread
to the euro zone. As the Japanese market was rallying lately, Monday's selling
served as a good opportunity for correction," said Yutaka Miura, a senior technical
analyst at Mizuho Securities. "But European debt issues will likely take
years to be resolved, and we need to be prepared for a sell-off like this again
as the Japanese market could easily get hit by a strong yen when investors buy
the yen." The Nikkei added 247.60 points to 12,468.23 after sliding 2.7
percent on Monday, its biggest one-day drop in 10 months. The index is just
0.74 percent away from a 4-1/2 year high of 12,560.95 marked last Friday. Ahead
of a parliamentary vote in Cyprus that will either secure the island's
financial rescue or threaten default, euro zone ministers have urged Cyprus to
let smaller savers escape a controversial levy on bank deposits.
Still, investors are concerned that forcing ordinary citizens
to fund bank rescues up front, through a tax on deposits, is setting a precedent
that could lead to other bailout countries imposing something similar on
depositors. On Tuesday, Monday losers such as exporters and financials were
bought back. Sony Corp surged 6.8 percent and was the most-traded on the main
board by turnover. Mazda Motor Corp jumped 5.6 percent and Nikon Corp rose 3.4 percent.
The broader Topix gained 1.7 percent to 1,045.89 in relatively
thin trade, with 2.84 billion shares changing hands. Last week, average daily volume
was 3.72 billion shares. The benchmark
Nikkei has rallied nearly 44 percent since mid-November when Prime Minister
Shinzo Abe embarked on aggressive fiscal and monetary expansion campaign to
revive the ailing economy. Investors are also focused on the U.S. Federal
Reserve's two-day policy-setting meeting starting on Wednesday and the change
of leadership at the Bank of Japan this week.
"Investors are
ready to chase the market higher to 13,000 on hopes for easing by the new leadership
next month," said Mizuho's Miura.
STILL UPBEAT
Goldman Sachs remained upbeat on Japanese equities, lifting its
12-month Topix target to 1,250 from 1,100. "Without a doubt, going 'long
Japanese equities' has become one of the most popular trades among global
investors in 2013. This is not to say, however, that every long-only foreign investor
is neutral or overweight Japan," Goldman Sachs said in a note. "We
estimate that if the underweight gap of 2.8 percentag points of EAFE-benchmark
mutual funds were to close, this could imply roughly $42 billion of potential
foreign inflows from this investor segment." (EAFE=Europe, Australasia,
Far East) Foreign investors bought 1.12 trillion yen ($11.7 billion) worth of
Japanese shares in the week through March 9, their largest net purchase since
the Ministry of Finance began collecting the data in 2005.
Market participants said that Japan's decision to join Trans-Pacific
Partnership (TPP) membership talks was acting as a long-term catalyst to chase
the market higher. "This is, in our view, clear evidence that Abe is not
just about 'buying growth' ahead of the July elections, but really about a
fundamental pro-growth policy change," Jesper Koll, head of Japanese equity
research at JPMorgan, wrote in a note, adding that banks would be a prime beneficiary
if TPP forced a rise in competition, which would mean that companies would
re-invest in buildings and facilities as well as accelerate mergers and acquisitions.
The Avanti Group
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