The Nikkei share average advanced on Thursday, shrugging off data showing China's manufacturing activity shrank for a fifth straight month in March, with market participants seeing Japanese equities as a buy. "People are just more upbeat on Japanese equities. The China PMI looked a bit nasty but didn't turn out to be that bad," a senior dealer at a foreign bank said.
The HSBC flash purchasing managers' index showed the overall rate of contraction in China's manufacturing sector accelerated, with new orders sinking to a four-month low. "I still think the Japanese market is a buy, and I think most people agree and they are under-invested," the dealer said.
The Nikkei has risen nearly 20 percent so far this year, buoyed by a run of robust US economic data and accommodative monetary policy by global central banks. Market players expect further gains as a weaker yen will likely lift corporate earnings expectations.
However, Japanese firms with large exposure to China were down on Thursday, with construction machinery maker Komatsu Ltd off 1.4 percent and industrial robot maker Fanuc Corp losing 1.2 percent. The Nikkei closed up 0.4 percent at 10,127.08 after snapping a five-session winning streak on Wednesday. The broader Topix added 0.4 percent to 862.07. Nearly 2 billion shares changed hands on the main board, down from 2.12 billion on Wednesday.
Technical indicators suggest a pullback could be on the cards, with the Nikkei's 14-day relative strength index at 75 and the Topix's at 69.7. Seventy or above is considered overbought. Still, Goldman Sachs raised its Topix six-month target to 970 from 900, representing an upside of 12.5 percent from current levels. Nomura Holdings fell 1.3 percent, extending a 4.1 percent loss the previous session, and was the most traded stock on the main board by turnover after sources said an employee at the firm was the source of a leak in an insider trading case.
Japan's securities regulator recommended a 50,000 yen ($600) fine against Chuo Mitsui Asset Trust, a unit of Sumitomo Mitsui Trust Holdings Inc, on Wednesday, saying the asset manager sold Inpex Corp shares after a tip-off from a broker about its plan for a roughly $6 billion offering. Sumitomo Mitsui Trust recovered 2.2 percent after Wednesday's 5.1 percent battering.
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