Tuesday, September 05, 2006

Nikkei gains, Softbank up but stronger yen weighs

By Eriko Amaha

TOKYO (Reuters) - The Nikkei average ended up 0.17 percent on Tuesday as investors sought bargains in stocks such as Internet group Softbank Corp. while a stronger yen saw profits taken on exporters such as Honda Motor Co. Ltd.

Sharp Corp. declined after Daiwa Institute of Research downgraded it while Fast Retailing Co. managed to end flat despite announcing it would not make a bid for a fellow clothing retailer Giordano International Ltd., which is listed in Hong Kong.

"Softbank and Rakuten are rebounding and that shows a healthy appetite among retail investors," said Toru Otsuka, deputy general manager of Mizuho Investors Securities Co. Ltd.'s investment information department, referring to Rakuten Inc. which fell 16 percent last week.

The Nikkei eked out a 27.89-point gain to close at 16,385.96 after hitting a three-month high on Monday. The broader TOPIX index inched up 0.12 percent to 1,651.35.

Investors appear to be split over the outlook for the Japanese economy, keeping the market in check. Pessimists include Takahiko Murai, general manager of equities at Nozomi Securities, who said weak consumer price and industrial production data, among others, had led institutional investors to reallocate money into bonds from stocks.

"The Japanese economy is slowing down. Corporate earnings look strong right now and money is coming into the stock market," he said. "It looks like we might see a limit to profit growth going forward."

But Masaru Hamasaki, a senior strategist at Toyota Asset Management, said his firm projects 7 to 8 percent growth in recurring profit for the year to next March at major non-financial companies on the Tokyo Stock Exchange's first section.

That compares with an average 2 percent rise projected by those firms, according to data compiled by Shinko Research Institute, which raises the possibility that many of them could upgrade their forecasts.

"A slowdown in the economy probably cannot be avoided. But we expect corporate earnings to remain strong with factors such as cost-cutting," he said.

SOFTBANK SHINES

Telecoms and Internet firm Softbank soared 5.7 percent to 2,310 yen, taking its gains to more than 15 percent since it set a one-month low of 1,995 yen on Aug. 28, hit by a bearish report by Lehman Brothers which lowered its target price to 900 yen.

All Nippon Airways Co. Ltd. climbed 2.4 percent to 473 yen after Credit Suisse raised its price target for Japan's No.2 airline to 450 yen from 390 yen on a stronger-than-expected business performance during the peak summer travelling season.

Other gainers included Nippon Steel Corp., which rose 2.0 percent to 509 yen after business daily Nihon Keizai reported that Japan's biggest steel maker and South Korea's POSCO are in talks to jointly develop mines, supply each other with semi-finished products and lift their cross-shareholdings.

Meanwhile, auto stocks slid as the yen rose to a two-week high against the dollar with Honda falling 0.8 percent to 3,950 yen. The stock also hit a three-month high last week, making it susceptible to profit-taking.

In the technology sector, Sharp fell 1.9 percent to 2,080 yen after Daiwa cut its rating on the stock to a "3" from a "2".

Other tech shares lost ground. Shares in Olympus Corp., which hit a five-month high on Monday, dipped 0.6 percent to 3,520 yen while copier maker Fuji Photo Film Co. fell 1.1 percent to 4,330 yen after hitting a four-year high.

Fast Retailing, the operator of the Uniqlo casual-wear chain whose shares had gained some 16 percent since news broke that it was eyeing Giordano, ended unchanged at 11,120 yen.

Among notable stocks, ceramic construction materials maker Nichias Corp. tumbled 5 percent to 824 yen while A&A Material Corp. declined 3 percent to 192 yen after the Fair Trade Commission said it had raided the firms' offices on suspicion of price-fixing.

Separately, mixi Inc, Japan's largest Web operator of social networking systems, has set its initial public offering price at 1.55 million yen ($13,360). The company plans to go public on Sept. 14.

Real estate developer Tokyu Land Corp. and movie producer Toho Co. Ltd. will likely draw buyers on Wednesday as these two issues will join the Nikkei 225 share average when the benchmark is reshuffled next month, the compiler Nihon Keizai Shimbun Inc. said after the market closed.

Trade volume edged up with 1.77 billion shares changing hands, up from 1.66 billion shares on Monday. Advancers outpaced decliners 928 to 646.

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