Nikkei rebounds ahead of BOJ, investors expect future easing

12-Mar-2014 Intellasia | Reuters | 6:00 AM Print This Post

Japan’s Nikkei average gained on Tuesday, reflecting hopes that the Bank of Japan could signal later in the day its readiness to adopt more stimulus, although most investors do not expect the BOJ take any action yet.

Coal and oil companies led gains after they were heavily sold on Monday, in a possible sign of short-term trade dominating the market as caution over a slowdown in China and Ukraine tensions kept many investors on guard.

The Nikkei average rose 0.5 percent to 15,198.44, recouping about a half of its losses on Monday to edge near a five-week high of 15,312.60 hit on Friday.

“A majority of market players do not expect the BOJ to take action today but the market is likely to be supported as long as the BOJ keeps expectations for future easing alive,” said Toshiyuki Kanayama, senior market analyst at Monex Securities.

The BOJ is expected to maintain the current asset purchase scheme on Tuesday on a view the economy can weather a sales tax increase in April without extra support.

But some market players, fretting that the three percentage point tax hike could undermine consumption when wages are hardly growing, speculate the BOJ could take pre-emptive action to bolster the economy.

Bulls are taking heart from the fact the Nikkei is climbing above around 15,155, an important 50 percent retracement of its fall from 16,320 on December 30 to 13,996 February 5, which could open a way for test of around 15,430, a 61.8 percent retracement of the same decline.

Another technically important resistance is seen at 15,279, its 75-day moving average.

“I think the market will likely extend gains gradually as uncertain factors such as Ukraine and the weather-hit US economy will disappear,” said Kanayama at Monex.

Tensions between Russia and Ukraine continued with unidentified armed men firing in the air in Crimea as they moved into a Ukrainian naval post. Russia said the United States had declined an invitation to hold new talks on resolving the crisis.

Oil and coal product companies led the gains with a rise of 1.5 percent, after heavy selling on Monday. Showa Shell gained 2.6 percent.

The yen’s slight retreat to near the six-week low hit on Friday also underpinned some exporters, with Honda gaining 2.4 percent and Hino Motors rising 2.1 percent.

The yen stood at 103.29 yen to the dollar, near Friday’s low of 103.77.

The broader Topix index rose 0.5 percent to 1234.18 while the JPX-Nikkei Index 400, a gauge comprising firms with high return on equity and strong corporate governance, rose 0.6 percent to 11,170.56.


Category: Japan

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