Japan's Nikkei stock average rose for a fourth session on Thursday to a 9-1/2-month high as solid earnings and global merger activity encouraged foreign investors to keep snapping up outperforming Japanese shares. Foreign investors began buying lagging Japan stocks late last year, and this year Nikkei has gained some 6 percent, making it the best-performing Asian market so far in 2011.
Asian stocks outside Japan are down around 2 percent on the year to date, largely due to inflation worries and anticipated further interest rate hikes in countries like China. "Japan doesn't have those risks at the moment," said Masanaga Kono, chief strategist at asset management firm Amundi Japan but he added that it was not as if investors are becoming overweight on Japan.
"Those who were extremely underweight on Japan or people who didn't have Japan stocks are continuing to buy," he said. The Nikkei average finished up 0.3 percent or 28.35 points at 10,836.64, the highest closing price in nine and a half months. It earlier rose as high as 10,891.60, which was the highest intraday level since an April 30 peak of 11,092.52. The broader Topix index gained 0.7 percent to 974.14.
The April high becomes the Nikkei's next target but analysts say that with the market nearing 11,000 after rapid gains, it will become more vulnerable to profit-taking and any further advances will be hard-won. Japanese stocks are trading at 1.1 times current book value, below the average of global equity markets, which are trading at 2 times their current book values, data from Thomson Reuters StarMine showed.
Boosting sentiment were earnings from Dell Inc that beat expectations and an offer by activist investor Nelson Peltz's Trian Group to acquire Family Dollar Stores Inc. Core blue chip stocks outpaced advances in small and mid-size cap shares with printer and digital camera maker Canon Inc climbing 3.9 percent and Sony Corp rising 1.8 percent.
Overseas investors were net buyers of Japan stocks last week for the 15th straight week, the longest buying streak since late 2005/early 2006, data showed. They bought a net 192.2 billion yen ($2.3 billion) of Tokyo shares last week. "What's remarkable recently about foreign buying is that inflows from Asian investors overwhelmed European and US buyers last month," said Ishiguro.
Gains on the Nikkei were underscored by high volume, with the day's total of 2.4 billion shares coming close to the previous day's one-month high, and comfortably beating last week's daily average of 2.2 billion. The Tokyo stock exchange's first section has seen more than 2.0 billion shares change hands for nine straight sessions. Advancing issues overwhelmed declining ones 2 to 1.
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