Nikkei average rises

The Nikkei average rose on Tuesday, helped by sporadic buying from Asian investors and gaining momentum after China inflation data provided no nasty surprises, but concerns about the global economy may mean the bounce won't last. Tokyo Electric Power Co's stock soared after Japan's cabinet approved a compensation scheme for people affected by the crisis at its crippled Fukushima nuclear plant.
Analysts said Chinese inflation figures provided some relief that the country would not get more aggressive in tightening policy. China's inflation accelerated to 34-month highs of 5.5 percent in the year to May, slightly above market expectations of a rise to 5.4 percent. Although the reading could add to the case for Beijing to tighten monetary policy further, it was below the market's whisper number of 6 percent. "The figures were almost in line with the forecasts, so investors were relieved," said Tsuyoshi Kawata, a senior strategist at SMBC Nikko Securities.
"But investors are still concerned about the slowing global economy and therefore the rebound may be short-lived." In active trade, the benchmark Nikkei rose 1.1 percent to 9,547.79 and the broader Topix gained 1.3 percent to 822.86. Buying from Asian investors as well as continued interest in small cap shares from European investors that has been seen over the past week supported the market on Tuesday, a market player said.
The Nikkei has traded mainly between 9,400 and 9,800 since April and analysts expect that range to hold for the next few weeks, saying Tokyo shares look attractive, trading roughly at book value compared with around 2.1 times book value for the S&P 500. "Compared to the US, Japanese shares look cheap. In addition, the Japanese corporate earnings are likely to recover after a plunge after the disaster," said an official at a Japanese brokerage house.
Tokyo Electric Power Co jumped 25 percent to 249 yen. But it remains uncertain when, or even if, the scheme will be enacted into law, given the shaky political landscape under lame-duck Prime Minister Naoto Kan, who has been unable to push through several disaster-related bills in a divided parliament.
Other utilities also gained. Kansai Electric Power Co added 10 percent to 1,277 yen and Chubu Electric Power Co gained 13 percent to 1,307 yen. Banks, who are lenders to Tepco, ended higher, with Sumitomo Mitsui Financial Group rising 2.2 percent to 2,345 yen, Mitsubishi UFJ Financial Group adding 2.2 percent to 372 yen and Mizuho Financial Group gaining 1.6 percent to 124 yen. Volume was fairly heavy, with 1.94 billion shares changing hands on the Tokyo stock exchange's main board, more than the daily average of 1.59 billion shares for the past 25 days.