Japan's Nikkei share average edged higher on Monday, recovering from last week's retreat, as investors bought metal shares and picked up laggard blue chips, with a softer yen continuing to underpin market sentiment. The Nikkei closed 0.1 percent higher at 10,018.24 points after logging its biggest one-day percentage fall in two months on Friday, while the broader Topix index was down 0.1 percent at 851.82.
"We are in a consolidation phase, so the market is just going sideways for now ... It's just going to be choppy for the next few days. Volumes do tend to get lighter when that happens," a senior dealer at a foreign bank said. More than 1.8 billion shares changed hands, up from 1.76 billion shares on Friday but down from an average of 2 billion shares last week. Topping the Topix core 30 as the biggest percentage gainer was Nissan Motor Co Ltd, which rose 2.5 percent.
The automaker is up 26.6 percent this year, underperforming a 35.5 percent gain in Toyota Motor Corp and a 30.6 percent rise in the transport equipment sector. The non-ferrous metals sector was also in demand, rising 0.8 percent after Chile's Codelco, the world's top copper producer, reported a surge in profit and an increase in production. Mitsubishi Materials Corp added 1.1 percent and Sumitomo Metal Mining Co Ltd put on 1 percent.
Strategists said last week's fall would entice many investors to pick up stocks as they failed to hop on the rally earlier this year, which has led to a 18.5 percent gain in the Nikkei since the start of January. "What we're seeing now is a typical excess liquidity market. Stocks that are gaining here - real estate, financials, iron and steel - these are all 'bubble' stocks that rise as a result of easy monetary policy," said Kenichi Hirano, operating officer at Tachibana Securities.
Nomura Holdings sagged 2.7 percent, extending last week's sharp sell-off, after sources told Reuters an employee at Japan's top investment bank had tipped off fund managers at Chu Mitsui Asset Trust and Banking of a $6 billion share issue plan by Inpex Corp. Despite the sell-off, Nomura shares are still up 57 percent this year. Mobile gaming operator Gree Inc was also down sharply, shedding 5.2 percent in high volume, after a report citing an official that the government was considering an investigation into the company that could commence in April-May.
Short interest in Gree increased to 10.63 percent of outstanding shares on loan as of March 22, up from 9.49 percent on March 16, according to research firm Data Explorers. Despite concerns of a near-term pause, many banks were bullish on Japanese equities. Bank of America Merrill Lynch lifted its Topix target for the fiscal year 2012 to 950 from 900, or representing an upside of 11.5 percent from Monday's closing level.
Societe Generale was also upbeat, recommending investors go long on the Nikkei and short the Hang Seng China Enterprises Index because of the weaker yen. The yen was last traded at 82.586 to the dollar, well off an 11-month low of 84.187 plumbed on March 15 but down from Friday's high of 81.97.
"Attractively prices, Japanese stocks will also be supported by the reconstruction effort post-earthquake which has experienced a slow take-off and will be running at full steam in the quarters ahead," Societe Generale said in a note. "In the meantime, Chinese companies' earnings are strongly influenced by property sales and export growth, both decelerating." That compared with an earnings momentum of minus 1.9 percent for the Hang Seng China Enterprises index and minus 0.2 percent for the S&P 500.