Nikkei rises 0.9 pct as drug makers, Softbank gain

TOKYO, Nov 27 (Reuters) The Nikkei average rose 0.9 percent on Monday as Eisai Co. Ltd. and other drug makers advanced on better ratings, while a rebound in small cap shares spurred investor buybacks of Softbank Corp.

Chemical maker Tosoh Corp. surged more than 5 percent after it said it had developed a low-cost alternative to an indium-based material used in the production of liquid crystal display (LCD) panels, but major exporters such as Honda Motor Co.

Ltd. fell on concern a higher yen could hurt earnings.

Kenji Kobata, managing director in the research department at Ace Securities Co. Ltd., said the market rebounded as selling by foreign hedge funds was losing steam with the approach of their end-November book closings.

Selling pressure also eased due to caution that the market had been oversold recently, he added. The Nikkei lost 2.2 percent last week in its fourth straight weekly loss.

''The recovery is not so strong as investors are cautious about buying at higher prices before the release of key economic indicators later this week,'' Kobata said.

The Nikkei was up 141.78 points at 15,876.38 at 0506 GMT, recovering after a sharp drop at the start of trade. The broader TOPIX index was up 1.0 percent at 1,553.89.

Eisai Co. Ltd. rose 3.5 percent to 6,250 yen, becoming the second biggest contributor to the Nikkei's rise, after UBS raised its rating on Japan's fourth-largest drug maker to ''Buy 2'' from ''Neutral 1'', and lifted its target price to 6,800 yen from 6,300 yen.

UBS said domestic sales of Eisai's ethical drugs such as Aricept and Aciphex were strong, and that the company's overseas earnings were buoyant as a result of a positive contribution from the impact of Medicare Part D in the United States.

Softbank, one of the most popular stocks among investors, gained 2.7 percent to 2,320 yen.

Nippon Telegraph and Telephone Corp. (NTT) gained 2.8 percent to 581,000 yen after Morgan Stanley raised its target price for the stock to 652,000 yen from 647,000 yen.

Morgan Stanley said in a report that NTT's fibre optic broadband business should do well thanks partly to its brand name, while the company is making efforts to keep costs low.

All Nippon Airways Co. Ltd. rose 2.7 percent to 421 yen after Nikko Citigroup in its Monday report upgraded the stock to ''1M'' from ''2M'', citing strong demand for its international flights.

The brokerage firm said ANA has rolled out competitive services and successfully raised fares while reforming its earnings structure to cope with a tough business environment.

In the meantime, Honda and other major exporters were sold after the yen rose to its highest in more than three months against the dollar. A stronger yen makes Japanese products less competitive in overseas markets and dents profits made overseas when brought back to Japan.

REUTERS PV DS1243