MW: Japan shares rally, find support as outlook improves
TOKYO (MarketWatch) -- Japanese shares stood out against a downbeat regional backdrop Thursday, with the benchmark Nikkei 225 index climbing post-holiday trading to its strongest intraday level in more than three weeks.
Expectations for a stronger U.S. dollar helped support exporters and upbeat outlooks for various sectors lifted sentiment among investors.
"The fact that Japan has been on holiday means a degree of catch-up with other major stock indices," said Mitul Kotecha, head of global FX Research at Calyon, in emailed comments.
Broker upgrades on some Japanese companies also offered support and "the fact USD/JPY is firmer over recent days has provided a bit of relief to exporter stocks," he said.
In late morning trading, the Nikkei 225 Stock Average was up 1.7% at 10,548.42 in Tokyo after briefly touching 10,566.98, its strongest level since Sept. 1. The broader Topix added 1.4% to 952.37. Trading resumed Thursday after a three-day closure for local holidays.
Elsewhere, stocks weakened, with South Korea's Kospi down 0.3%. Australia's S&P/ASX 200 and New Zealand's NZX-50 each slipped 0.2%.
And in early dealings, the Shanghai Composite fell 0.1% and Hong Kong's Hang Seng Index was down 1.8%.
"People are underweight Japan and are skeptical of the market holding a rally," said Brett McGonegal, managing director at Cantor Fitzgerald. "As expectations of the dollar firming augment, the market will start to tick up and force the hands of those underweight."
Among the standouts in Japanese stocks were exporter shares, which can benefit as the dollar gains ground against the yen. Elpida Memory (JP:6665 1,183, -32.00, -2.63%) climbed by 5.7%, Advantest Corp. (JP:6857 2,425, +15.00, +0.62%) rose 3.9% and NEC Corp. (JP:6701 290.00, -8.00, -2.68%) added 4.5%.
"Some good data points out of tech from Intel (INTC 19.88, +0.35, +1.79%) , also some positive capex numbers in LCD glass, coupled with a turn in sentiment in DRAM and NAND flash memory are forcing those underweight [traders] to play catch up," said McGonegal.
Investors in Tokyo shrugged off economic data Thursday. Japan reported a trade surplus for a seventh straight month in August, but data showed both exports and imports continued to shrink from a year earlier due to the impact of the global economic crisis. See trade data story.
Longer-term concerns certainly exist in the Japanese market, "especially regarding the liquidity of the U.S. consumer and global trade, but these are massive, slow, glacial issues, not overnight headaches," said Richard Hastings, consumer strategist at Global Hunter Securities.
Defying broader weakness
Strength in Japanese trading came despite weakness in the U.S. markets Wednesday after the Federal Reserve held interest rates steady at historic lows. See full story on the Fed.
"U.S. equities were a bit off yesterday partly on concerns about global trade and growth," said Hastings. "These worries typically result in a simultaneous uptick in the USD generally."
"But too much equity market weakness globally has proven to be hugely positive for the JPY and that, in turn, is always bad for export-sensitive Japan and its stocks," he explained.
