Nikkei hits two-week high
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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