Nikkei ends up, aided by strong machinery orders

Tokyo, June 9: The Nikkei average ended up 0.81 percent on Friday, a day after its worst fall in a year, as stronger-than-expected machinery orders data encouraged investors to buy machinery stocks such as Komatsu Ltd.

The Tokyo Stock Exchange's first section had lost 96.3 trillion yen (5.6 billion) in value up to Thursday since hitting a multi-year closing high on April 7.

Mitsui Fudosan Co Ltd. and other property stocks rose after data showing falling office vacancy rates, while shares of steel and brokerage firms gained ground by drawing bargain hunters.

Japanese core private-sector machinery orders, a key gauge of capital spending, rose 10.8 percent in April from the previous month, stronger than market forecasts averaging 3.3 percent.

''The data is very volatile. Nonetheless, it did help lift the market,'' said Norihiro Fujito, general manager at Mitsubishi UFJ Securities Co. Ltd. Still, wariness remains due to persistent worries about the economic outlook for the United States, a key trading partner for Japan, he said .

''I don't think the market is ready to turn around just yet,'' he added.

Yutaka Shiraki, senior strategist at Mitsubishi UFJ Securities Co. Ltd., said a recovery of U.S. stocks is a must for the Japanese market to aim higher.

''Every time market players felt the Japanese market was ripe for rebounds, drops in overseas markets pulled the rug from under them,'' he said.

The Nikkei added 117.81 points to 14,750.84. The benchmark has lost 16 percent since April when it hit its highest close for the year.

On the week, the Nikkei lost more than 1,000 points, posting its biggest one-week loss in five years.

The TOPIX index rose 1.11 percent to 1,498.68.

PROPERTY AND STEEL SHINE Komatsu jumped 6.2 percent to 2,060 yen and Kubota Corp., a maker of farm equipment and cast-iron pipes, gained 8.3 percent to 1,006 yen.

Property stocks rose after industry data showed office vacancy rates in Tokyo fell to 3.18 percent in May from 3.29 percent in April.

Mitsui Fudosan, Japan's largest property firm, jumped 3.7 percent to 2,260 yen and second-ranked Mitsubishi Estate Co. Ltd.

rose 4.1 percent to 2,160 yen.

The steel sector rebounded after being the worst performer in the previous session.

Japan's No.2 steel maker JFE Holdings Inc. rose 2.8 percent to 4,480 yen and top-ranked Nippon Steel Corp. was up 2.4 percent at 391 yen.

Nippon Steel, the world's third-biggest steel maker, told Reuters on Thursday it aims to boost its export price by more than 10 percent next quarter in the wake of a strong market recovery in Asia, a sign that its profit this year could beat its forecast.

Shares of brokerage firms rose on expectations that gains in the market would help their businesses.

Daiwa Securities Group Inc. rose 3.4 percent to 1,338 yen and Nomura Holdings Inc. gained 4.5 percent to 2,095 yen.

A notable loser was Nippon Telegraph and Telephone Corp, which lost 1.7 percent to 531,000 yen after business daily Nihon Keizai reported the world's largest telecoms group by revenue may face government pressure to cut the fees it charges other companies to use its fibre-optic lines.

GETTING TO THE BOTTOM Analysts agree that the market is getting close to the bottom. For one, retail investors, who had been engaged in margin trades, have sold massive shares to close their positions and pay off their loans.

Data showed that outstanding shares that have been bought on credit fell to 5.3 trillion yen as of June 2 from 5.7 trillion yen a week earlier, the biggest decline since April 2000.

Naoyuki Torii, general manager and strategist Fukoku Capital Management Inc., said the market is low enough for his fund to buy stocks.

''If we buy now, we can probably get decent returns when we close our book next March,'' he said.

Some have already started to pick up recently battered stocks.

Goldman Sachs said in a report on Thursday that the PE on its estimates of March 2007 net profits for Japanese banks has fallen to 11.7 times, versus the global average of 12 times.

It lifted the ratings on Resona Holdings Inc. and Sumitomo Trust&Banking Co to ''in-line'' from ''underperform''.

Resona rose 4 percent to 339,000 and Sumitomo Trust gained 3.7 percent to 1,032 yen.

Trade was active, with 3.17 billion shares changing hands on the first section, the highest total since Jan. 18. Gainers outpaced decliners 1,210 to 429.

Reuters