Nikkei up, rebound hopes offset Murakami concern

TOKYO, June 2 (Reuters) The Nikkei share average rose 1.84 percent on Friday, as gains in Sony Corp. and others on hopes a recent market slide has ended offset concerns over reports of a probe into a fund led by well-known shareholder activist Yoshiaki Murakami.

The Nikkei briefly dipped into negative territory after reports regulators were investigating the fund triggered selling in Sumitomo Warehouse Co. Ltd. and other firms in which the fund has major stakes.

But analysts said that unlike an investigation into Internet firm Livedoor Co. earlier this year that sparked a big sell-off of Japanese shares, the effect of the latest reports would be limited and there were signs of improving sentiment among retail investors.

''In terms of selling, we are probably in the home stretch,'' said Yasuo Yabe, director of sales at Meiwa Securities.

''Unlike the Livedoor incident, the (reports) on the Murakami fund came out when the market was already at low levels. The impact from this should be limited to the companies whose shares are actually in the fund's portfolio.'' The Nikkei rose 285.57 points to 15,789.31. For the week, it ended down 1.14 percent.

The TOPIX index rose 1.36 percent, or 21.55 points, to 1,606.11.

Sony gained on bargain hunting, rising 3.6 percent to 5,160 yen, recouping part of its 4.8 percent losses in the past three sessions. Matsushita Electric Industrial Co. Ltd., the maker of Panasonic goods, added 2.6 percent to 2,540 yen.

Kyocera Corp. rose 3.1 percent to 9,620 yen and Sharp Corp gained 1.3 percent to 1,898 yen after the Nihon Keizai Shimbun reported that these companies will beef up the capacity to produce solar batteries.

KDDI Corp. gained 5.2 percent to 756,000 yen after brokerage UBS said in a report on Thursday that it had lifted its target price for the stock to 1.05 million yen from 770,000 yen and kept its ''buy'' rating.

Softbank Corp. snapped its five-day losing streak and rose 3.2 percent to 2,590 yen. Some analysts said the rise was a sign of improved sentiment among retail investors, who are among the biggest buyers of Softbank.

After the market closed, Nissan Motor Co., Japan's second-largest automaker, and mini-vehicle maker Suzuki Motor Corp. said they would expand their business tie-up, such as by sharing manufacturing facilities in emerging markets including India.

Prior to the announcement, Nissan rose 0.2 percent to 1,372 yen and Suzuki Motor rose 2.9 percent to 2,675 yen.

SELLING ALMOST OVER Haruo Otsuka, chief fund manager at Toyota Asset Management, said although concerns about the economic outlook for the United States, Japan's major trading partner, still remain, selling in the market may be close to an end for now.

He said that because of cost cutting, Japanese companies are now able to make profits even if sales only grow by small amounts. Once expectations for higher earnings growth emerges, the market is likely to rise, he added.

''The market came under pressure because of the news on the Murakami fund, but once selling subsides, institutional investors are ready to buy quality stocks on dips,'' he said.

Shares fell in companies in which Murakami's fund has major stakes.

Department store operator Matsuzakaya Co. Ltd. tumbled 11.8 percent at 750 yen, Sumitomo Warehouse Co. Ltd. lost 7 percent to 739 yen, and Nakamuraya Co. Ltd. dropped 9.4 percent to 627 yen.

Orix Corp. lost 6.6 percent to 30,450 yen on concerns it will be hit with losses from its investment in the fund.

The fund has pioneered shareholder activism in Japan, causing ripples in business circles with its aggressive approach to seeking change at the companies it buys into.

Norihiro Fujito, general manager, investment research and information division, at Mitsubishi UFJ Securities Co. Ltd., said he was concerned about how foreign investors would take the reports on the investigation.

''This could be regarded as a problem unique to Japan,'' he said. ''They may think that the mergers and acquisitions business is difficult to do in Japan now.'' Yabe of Meiwa Securities also said some investors may pull out money, thinking that an investigation may lead to stepped-up monitoring of investment funds.

Tokyo saw its busiest day of trade in more than two months, with 2.40 billion shares changing hands on the Tokyo exchange.

Advancers beat out declines 955 to 661.

REUTERS CS DS1430