Nikkei rises helped by economic data; Sony shines

TOKYO, Feb 23 (Reuters) The Nikkei average rose 1.99 per cent to end above 16,000 for the first time in a week on Thursday, as investors encouraged by strong economic data bought Mitsubishi UFJ Financial Group Inc. and other companies that rely on domestic demand.

Sony Corp. led the gains after it unveiled a plan to scrap adviser positions as part of its restructuring, while Matsushita Electric Industrial Co. ended up 2.7 per cent at 2,495 yen.

After the market closed Matsushita, the maker of Panasonic goods, said senior managing director Fumio Ohtsubo will become president in June and current president Kunio Nakamura will become the company's chairman.

''There has been no change in the outlook for economic fundamentals, and that was proved in the latest corporate earnings (report season),'' said Susumu Abe, a manager in the information and investment department at Mito Securities Co.

The Nikkei ended up 314.32 points at 16,096.10, closing above 16,000 for the first time since Feb. 16. The broader TOPIX index finished up 1.93 per cent at 1,640.47, after climbing more than 2 per cent at one point.

Still, Takashi Kamiya, chief economist at T&D Asset Management, said the stock market may stay in the current range for a while, until it gets confirmation on further economic expansion.

''The market is already at a fair value and the economy has to growth further for the market to rise,'' he said. ''What fund managers are doing right now is shuffling their portfolios -- switchings sectors, selling outperforming ones and scooping up laggards.'' Banks gained after data showed the tertiary sector activity index, which gauges conditions in the services sector, rose 0.2 per cent in December from the previous month. That compared with a forecast of a 0.3 per cent rise.

Leading lender Mitsubishi UFJ Financial Group rose 2.5 per cent to 1.63 million yen while its peer Mizuho Financial Group Inc. rose 1.7 per cent to 910,000 yen.

Property stocks also rose on the optimism about the economic recovery with leading property developer Mitsui Fudosan Co. Ltd.

up 4.8 per cent to 2,400 yen and No.2 Mitsubishi Estate Co. Ltd.

rising 4.6 per cent to 2,495 yen.

Japan's No.1 brokerage, Nomura Holdings Inc., rose 2.8 per cent to 2,170 yen after a report in business daily Nihon Keizai saying Japan's ''Big Three'' brokerages are planning to issue record dividend payouts for the 2005/06 financial year.

Second-ranked Daiwa Securities Group Inc. climbed 2.8 per cent to 1,357 yen and Nikko Cordial Corp. rose 2.4 per cent to 1,763 yen.

In the technology sector, Sony rose 2.9 per cent to 5,630 yen after the electronics and entertainment conglomerate said on Wednesday it is scrapping 45 adviser positions as part of restructuring, leading to the departure of well-known names in its old guard.

Factory automation equipment maker Keyence Corp ended up 4.8 per cent to 31,800 yen. An executive told Reuters it is on track to hit its sales and operating profit targets for the year to March 20.

After the close, Citizen Watch Co. Ltd. said it would cancel 19.23 million of its own shares, or 4.81 per cent of its outstanding stock, on March 3. Prior to the announcement, the stock ended up 3.3 per cent at 1,073 yen.

INTEREST RATES The Tokyo market is also keeping a close eye on monetary policy at home and in the United States.

Takahiko Murai, general manager of equities at Nozomi Securities, said the market has become sensitive to changes in the Bank of Japan's monetary policy and investors are becoming more selective.

''Investors have begun to look for companies whose profit growth is not high but steady and whose share valuations are cheap,'' he said. ''So financially sound companies such as Toyota Motor Corp., Honda Motor Co. and Canon Inc. may be targeted.'' The yen rose against the dollar and bonds fell on Thursday after BOJ Governor Toshihiko Fukui reiterated the central bank would eventually raise interest rates.

Abe of Mito Securities said the pace at which the BOJ raises interest rates is key. ''As long as the BOJ raises interest rates in tandem with the economic recovery, there should be no negative impact on the stock market,'' he said.

Market participants expect the BOJ to start dismantling its five-year-old hyper-loose monetary policy around April to reflect the end of deflation, and some have been buying Japanese shares in anticipation of this change.

Merrill Lynch said in a report on Thursday its survey of 45 global investors on the BOJ's monetary policy showed that 38 per cent of respondents thought the Nikkei would rise after the BOJ exits its so-called ''quantitative easing'' policy, and 53 per cent expect a rise in the Nikkei when the BOJ raises short-term interest rates from zero.

Volume hit its lowest level since Friday, with 1.996 billion shares changing hands on the Tokyo exchange's first section.

Advancers beat decliners by a ratio of almost 10 to 1.

REUTERS SD PM1431