Nikkei rises in thin trade, Mitsubishi UFJ Sec up

Tokyo, Aug 29: The Nikkei average gained 0.81 percent in thin trade on Tuesday, rising for the first time in five sessions as property stocks such as Mitsubishi Estate Co.

Ltd. gained on expectations the Bank of Japan will not raise rates in the near future.

Mitsubishi UFJ Securities Co. Ltd. jumped more than 9 percent after a report that parent Mitsubishi UFJ Financial Group Inc.

(MUFG) plans to turn the brokerage arm into a wholly-owned unit.

The report, confirmed by the bank after the close, fuelled expectations that profitability of the industry as a whole would improve if similar moves follow suit, said Masatoshi Sato, a senior strategist at Mizuho Investors Securities. ''The direction is correct, so it's welcome,'' he said.

But the market's overall gains were limited due partly to a fall in trading volume to a new low for the year.

While an expected halt to interest rate rises in Japan following last week's soft consumer price data would curb borrowing costs and maintain housing demand, analysts are concerned about an economic slowdown in the key U.S. market and a looming United Nations deadline to stop Iran's nuclear programme.

''The possibility of tough UN sanctions against Iran is hanging over us. That's the main issue which makes us feel hesitant to trade,'' said Naoyuki Torii, general manager and strategist at Fukoku Capital Management.

The Nikkei rose 127.97 points to 15,890.56 after hitting its lowest close since Aug. 11 the previous day.

The broader TOPIX index was up 0.98 percent at 1,615.99.

Tuesday's data showing Japanese household spending fell for the seventh straight month in July on cool, wet weather came in line with lowered market expectations, analysts said.

Subdued Trade

Only 1.25 billion shares changed hands on the Tokyo bourse's first section, the lowest since July 15 last year. Advancing shares beat decliners by a ratio of more than three to one.

A lack of participation by foreigners dampened activity in Tokyo, said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC's equity planning and administration department.

''After building up quite a lot of net long positions two weeks ago, foreign investors have mostly gone for summer holidays,'' he said. ''We're looking forward to their return next week if data in the U.S. suggests no rate rise in the near future.'' U.S. economic data due later this week, including revised April-June gross domestic product and monthly employment figures, is eagerly awaited after weaker home sales last week.

Real estate shares gained ground, with Mitsubishi Estate rising 2.5 percent to 2,500 yen and rival Mitsui Fudosan Co. Ltd.

gaining 2 percent to 2,580 yen.

Shares of Internet and telecoms firm Softbank Corp. trimmed some of their recent losses, rising 4 percent to 2,100 yen.

Shares in the company had fallen more than 14 percent in the previous five sessions, hit in part by a brokerage downgrade.

Mitsubishi UFJ Securities climbed 9.8 percent to 1,581 yen after the Tokyo Stock Exchange allowed trading of the shares to resume in late afternoon.

Trading was temporarily suspended after Kyodo news agency said MUFG, Japan's biggest bank, would buy the 38.8 percent of Mitsubishi UFJ Securities it does not already own in a share swap to be completed by the end of next March. The two companies said later only that they are considering a share swap.

Kabu.com Securities Co., an online brokerage unit of MUFG, gained 6.9 percent to 232,000 yen.

Shares in MUFG were up 1.3 percent at 1.6 million yen.

Matsushita Electric Industrial Co. Ltd. rose 0.2 percent to 2,450 yen. There is concern about a glut of shares after the Panasonic product maker said its shareholders, including the Banks' Shareholdings Purchase Corp. (BSPC), would sell 40.95 million of its shares, worth just over 100 billion yen (3.3 million) based on Monday's closing price.

But Goldman Sachs said in a note to clients that excessive pessimism from expected share sales by BSPC is unwarranted.

It said BSPC, a government-backed share-buying body set up in 2002 to help banks unload massive shareholdings, held some 2.6 trillion yen (.25 billion) worth of shares in various companies at current market values.

''Since the central purpose of these stock purchase schemes was to support the equity market, we are sceptical that the government would depress the market with large-scale, concentrated liquidations,'' Goldman Sachs said.

Reuters