Nikkei hits two-week high

The Financial Daily - - MONEY & FOREX -

TOKYO: Ja­pan's Nikkei stock av­er­age climbed 2.6 per cent, hit­ting its high­est level since a post-quake panic sell-off as the yen soft­ened against the dol­lar, but in­vestors said the gains may be short-lived as bar­gain-hunt­ing by for­eign­ers' peters out.

Mar­ket play­ers also said the Bank of Ja­pan's pur­chases of ex­change-traded funds un­der an as­set pur­chase pro­gramme adopted to bol­ster the econ­omy was lend­ing some sup­port to the mar­ket ahead of the busi­ness year-end on Thurs­day.

In­flows from pas­sive funds and year-end win­dow dress­ing by in­sti­tu­tional in­vestors were also cited as rea­sons that pushed the Nikkei con­sid­er­ably higher in af­ter­noon trade.

But now that the bench­mark has re­gained more than half of the ground it lost in the postquake rout, for­eign funds are buy­ing less ag­gres­sively.

"For­eign­ers have stopped pil­ing into shares on dips, and are now mostly side­lined, wait­ing for more in­for­ma­tion on fun­da­men­tals and fur­ther de­vel­op­ments at the nu­clear plant," said Hideyuki Ishig­uro, a su­per­vi­sor at Okasan Se­cu­ri­ties in Tokyo.

The Nikkei ended the day up 2.6 per cent, or 249.71 points, to 9,708.79. The broader Topix in­dex ad­vanced 1.9 per­cent to 866.09.

Tokyo Elec­tric Power dropped an­other 18 per cent, adding to a slide to a 47-year low a day ear­lier as the gov­ern­ment pon­dered whether to na­tion­alise the op­er­a­tor of a stricken nu­clear plant. "We be­lieve the stock could go to zero, "an ex­ec­u­tive at a hedge fund with $1 bil­lion in­vested in Asia told Reuters on con­di­tion he was not iden­ti­fied. His fund he said has been buy­ing Tokyo Elec­tric's debt be­cause "we think the Ja­panese gov­ern­ment will guar­an­tee or na­tion­alise it". The util­ity's credit de­fault swaps have fallen sharply in the past few days, hav­ing hit a record high around 475 ba­sis points on Mon­day. Still, the cost of in­sur­ing its debt against de­fault is around 378, com­pared to 40 ba­sis points be­fore the quake.

BANKS LOSE Bank­ing stocks also felt Tokyo Elec­tric's pain, slump­ing on wor­ries about their loans to the com­pany. "You have to look at all the banks that are lend­ing to the com­pany. It's ob­vi­ous that in­vestors are go­ing to look at their sit­u­a­tion with a huge dose of skep­ti­cism," said Nori­hiro Fu­jito, se­nior in­vest­ment strate­gist at Mit­subishi UFJ Mor­gan Stan­ley Se­cu­ri­ties.

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