TOKYO: Japan's Nikkei average rose on Tuesday as foreign investors continued adding Japanese shares on a lower inflation risk while Wall Street's gains overnight supported general sentiment.
Analysts said that despite ongoing uncertainty about higher oil prices and developments in the Middle East, foreign investors may chase the Japanese market higher, though some correction is expected between the rises.
"US and European investors have been the main players in the Japanese market. But Asian investors have joined in as Japan is one of the few countries with a low risk of rate hikes," said Shun Maruyama, chief strategist at Credit Suisse. "They are buying Japanese stocks on a process of elimination as Japan has more tolerance for higher oil prices than other Asian countries."
China's battle with rising inflation is being watched closely by investors globally as the steps it takes to curb demand and loans impact on growth rates that have become a key driver of the broader world economy.
Chinese consumer prices rose 4.9 percent in January from a year earlier, accelerating from 4.6 percent in December, but growth was lower than the 28-month high of 5.1 percent hit in November.
Meanwhile, market analysts said investors are carefully awaiting some key US economic events. This week will see Fed Chairman Ben Bernanke's testimony at the Senate Banking Committee on Tuesday and US jobs data on Friday.
"Generally, sentiment is positive. While concerns about geopolitical risk from the Middle East could keep investors from chasing the market higher in the short term, recent high volume has proved that there still is foreign investor appetite in the Tokyo market," said Hiroichi Nishi, general manager at Nikko Cordial Securities.
The benchmark Nikkei rose 0.8 percent or 86.91 points to 10,711.00. The broader Topix advanced 1.1 percent to 961.65.
Credit Suisse's Maruyama said the Nikkei may recover to 11,000 by the end of March, a level last seen in May last year, before the market was hit by Greece's debt crisis.
Asahi Kasei gained 2.1 percent to 576 yen after the Nikkei business daily said it will team up with Nissan Motor Co and Omron Corp to develop an inexpensive power storage system made using recycled electric-vehicle batteries.
Softbank Corp gained 1.6 percent to 3,410 yen in heavy trade after the Nikkei reported it will team up with General Electric Co and launch a domestic off-site data storage service for medical images in September.
Shinsei Bank rose 7.7 percent to 112 yen on heavy volume after it said on Monday it would raise up to 69.4 billion yen ($850 million) by offering newly issued shares to overseas investors as it tries to bolster its capital base to meet tougher global rules.
Although the amount to be raised was slightly bigger than some analysts expected, the detailed announcement helped investors shrug off fears of dilution and focus on the long-term positive aspects of the move, market players said.
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