Japan's Nikkei average rose 1.5 percent on Tuesday, rebounding from a two-week closing low hit the previous day, with stocks that had fallen sharply such as Canon Inc and banks regaining ground. Major paper firms surged, with Mitsubishi Paper Mills Ltd jumping over 9 percent a day after Mitsubishi UFJ Securities raised its rating on paper mills, saying printing paper price hikes should drive up their earnings.
But trading was thin as investors stayed on the sidelines with US and British market holidays on Monday and Japan's corporate earnings season effectively over. "The market lacks energy. It only rose because investors who had shorted their index future positions were reversing their bets since Wall Street appears unlikely to fall that much today," said Norio Shimura, deputy head of the equity department at Chuo Securities.
The benchmark Nikkei ended up 203.12 points at 13,893.31. It slid 2.3 percent on Monday to book its lowest close in two weeks. The broader Topix index gained 1.8 percent to 1,368.25.
The Tokyo market is expected to track Wall Street's moves closely in the weeks ahead given a dearth of trading factors at home, with many analysts citing US stock indexes as the most decisive cue for the Nikkei. "Foreign investors move the Tokyo market, and their moves are in turn determined by the US market," said Kenichi Hirano, operating officer at Tachibana Securities.
Last week, US stocks booked their worst week in three months, dropping more than 3 percent, while the Nikkei shed 1.5 percent.
PAPER MAKERS SOAR: Mitsubishi Paper jumped to 253 yen, its 9.1 percent rise making it the biggest percentage gainer on the Nikkei and coming on top of a 1.3 percent gain the previous day. Hokuetsu Paper Mills Ltd shot up 7.8 percent to 471 yen, Oji Paper Co Ltd gained 3.1 percent to 502 yen and Nippon Paper Group Inc climbed 2.5 percent to 287,000 yen.
Despite recent scandals involving overstatement of the volume of recycled paper used in products, major domestic paper firms "will boldly raise printing paper prices", Mitsubishi UFJ Securities analyst Hiroyuki Okaseri said in a note dated Monday. Shares of digital camera maker Canon added 1.9 percent to 5,370 yen, and industrial robot maker Fanuc Ltd gained 1.8 percent to 10,710 yen.
Bank shares, which fell on Monday, rebounded with top lender Mitsubishi UFJ Financial Group adding 3.8 percent to 1,013 yen. Nomura Holdings Inc jumped 3.9 percent to 1,754 yen after Goldman Sachs raised its target price to 1,900 yen from 1,600 yen, saying Japan's largest brokerage would likely see a profit recovery after booking large losses for the year ended in March.
Kyodo Shiryo Co Ltd shot up 10.9 percent to 173 yen amid growing investor interest in the livestock feed company following a surge in grain prices. Morgan Stanley said in a report last week that a global shift in consumption towards chicken from beef and pork will accelerate amid rising grain prices since chicken farming consumes less grain and has a smaller environmental impact than cattle or pig farming.
Japan's largest drugmaker Takeda Pharmaceutical Co Ltd rose 2.8 percent to 5,930 yen after Nikko Citi raised its forecast for peak annual sales of a potential successor to its best-selling Actos diabetes drug to 300 billion yen ($2.90 billion) from 200 billion yen.
"The clinical data for DPPIV inhibitor diabetes therapy SYR-322 have been favourable," Nikko Citi analyst Hidemaru Yamaguchi wrote in a note to clients. After the close, Takeda said it has formed a strategic alliance with Alnylam Pharmaceuticals Inc of the United States on new approaches to discover treatments for cancer and metabolic disease. Trade was thinner on the Tokyo exchange's first section, with 1.6 billion shares changing hands, compared with last week's daily average of 2.3 billion. Advancing stocks beat declining ones by nearly 3 to 1.
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