Nikkei average soars

The Nikkei average rose on Tuesday as investors bought stocks tied to domestic demand with hopes Greece will get through its debt crisis boosting confidence, but further gains may be limited as the index nears the top of its well-worn range. Shares related to domestic demand, such as department stores and some steelmakers, gained as investors bet on a sharp post-quake recovery, while pension funds poured their recently received dividends back into the market.
Asian investors also supported Tokyo shares, but further gains beyond the Nikkei's recent peaks around 9,700 would require more concrete signs of a deal on Greek debt and also an easing in worries about a slowdown in global growth. "Unless uncertainty over Greece clears, share prices are unlikely to rise further in the near term," said Hideyuki Ishiguro, a supervisor at Okasan Securities.
Some market players have said China appears to be skipping a rate hike this month, straying from its pattern since last October of raising rates every two months, a development which could increase investor risk appetite for equities. The benchmark Nikkei rose 0.7 percent to 9,648.98, before falling prey to at one point hitting a three-week intraday peak above 9,700 profit-taking.
The broader Topix index gained 0.6 percent to 830.34. Some internal-demand related shares, battered in the wake of the March 11 earthquake and tsunami, staged a rebound on Tuesday on hopes that growing domestic consumption and reconstruction demand would boost profits.
Nippon Steel hit a seven-week high on Tuesday, adding 2 percent to 253 yen, after the Nikkei business daily said the firm had agreed with Nissan Motor on a 15 percent price hike for steel sheet in the six months to September. Nissan's shares have recently outperformed the broader market after the carmaker, Japan's second largest, announced a better-than-expected forecast for the current business year.
Indeed, attractive valuations were behind a rating hike for another steelmaker, Tokyo Steel, which according to Thomson Reuters data trades at 0.5 price-to-book ratio. The stock jumped to a seven week high, rising 4 percent to 828 yen, after Goldman Sachs hiked its rating to "buy" from "neutral".
"A potential slowdown in China and the US is likely to cloud the outlook for more export-oriented steelmakers, but not for Tokyo Steel, which should see strong reconstruction demand in the fiscal year to March 2013," said Rajeev Das, analyst at the brokerage. Takashimaya rose 2 percent to a two-month high, maintaining its strength after it raised its operating profit forecast to a 6.5 billion yen ($81 million) profit from a 1.5 billion yen loss for its fiscal first half to August 29, saying business had bounced back.
The outlook for Takashimaya boosted other department stores such as J.Front Retailing and Isetan Mitsukoshi Holdings. Those shares were also supported after Japanese retail sales rose for a second straight month in May compared with the previous month, signalling that consumers are more willing to spend as sentiment gradually recovers following the earthquake in March. Chart-wise, brighter signs are emerging for the Nikkei. Still, many investors will need to see voting by the Greek parliament on an unpopular austerity plan before they step up buying.
An initial Greek vote on the framework austerity package is due on Wednesday, and lawmakers then vote on Thursday on a separate bill containing specific steps to implement it. France offered a radical solution Monday for banks to roll over some Greek debt for 30 years, raising hopes that efforts to avoid a default by Greece is making progress. Trading volume was 1.7 billion shares, in line with last week's average. Advancers outnumbered decliners by 2 to 1.