Tokyo: Nikkei posts solid rise despite strong yen; financials higher

[TOKYO] Japan's Nikkei share average rose significantly on Thursday as investors bought back recently-battered stocks after US markets climbed overnight, shrugging off stronger-than-expected inflation data.

The Nikkei ended 1.5 per cent higher at 21,464.98, after tumbling to a four-month low on Wednesday and briefly dipping below its 200-day moving average.

A total of 28 out of 33 sectors were in positive territory, with financial stocks and exporters outperforming, ignoring the strong yen.

The dollar dropped below Wednesday's low of 106.725 yen and fell as far as 106.30 yen, its weakest level since November 2016. That marked a drop of 3.8 per cent from its early February peak near 110.50 yen.

"If you are a logical investor, you'd buy when you think stocks will rise and you'd sell when you think stocks will fall. But today's trade is not based on logic," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

"Short-term investors like overseas hedge funds were shorting Japanese stocks and futures since late January. They have their trades programmed to sell Japanese stocks when US stocks fell. But since US stocks rose overnight, they had to close such positions as there was a risk of losing." Japanese stocks have seen volatile trade in recent weeks after hitting 26-year highs last month.

Some traders say that repercussions from Wall Street's recent tumble have not undermined Japanese stocks' attractive valuations.

"Share price movements have become more volatile in recent weeks amid the repricing of inflation risk and rising US Treasury yields," said Jeremy Osborne, investment director at FIL Investments (Japan) Limited.

"While volatility may persist for some time, the recent selloff is more of a reaction to the rapid rise since last autumn rather than any deterioration in fundamentals," he said.

Insurance stocks soared on Thursday with Dai-ichi Life Holdings jumping 5.0 per cent and T&D Holdings surging 2.6 per cent.

Banks also rallied, with Mitsubishi UFJ Financial Group rising 1.8 per cent and Mitsui Sumitomo Financial Group gaining 1.7 per cent.

Exporters gained ground, with Tokyo Electron surging 4.6 per cent and Honda Motor Co gaining 1.3 per cent.

The broader Topix advanced 1.0 per cent to 1,719.27.

REUTERS