Nikkei up as Toyota, other exporters rise on yen

Tokyo, Dec 21: The Nikkei average added 0.22 percent on Thursday, edging further above 17,000 to its highest close in seven months as Toyota Motor Corp. and other exporters rose on hopes that a softer yen will boost their earnings.

Steel makers gained on the prospects of a further industry shake-up as Nippon Steel Corp. said it would boost its stake in Brazilian steel maker Usiminas, making the smaller firm an equity-method company in the latest tie-up in the rapidly consolidating steel industry.

Investors also picked up shares with high dividend yields such as utility firms including Tokyo Electric Power Co. and shipping companies on the view that the Bank of Japan may keep interest rates unchanged at its next policy meeting.

''Given the prospects of Japanese interest rates staying low for a while, stocks with high dividend yields, such as utility firms, look attractive to investors,'' said Yoshihisa Okamoto, senior vice president at Fuji Investment Management.

The Nikkei was up 36.79 points at 17,047.83, its highest close since May 9. The broader TOPIX index rose 0.26 percent to 1,671.30.

Investors also bought shares of exporters as a weaker yen strengthened hopes that they will raise their earnings forecasts for this business year, he added.

The dollar was at 118.40 yen in late Asian trade, staying close to a six-week high of 118.52 yen hit on Wednesday.

A softer yen is a boon to companies that make the bulk of their sales abroad because it boosts their profits when earnings from abroad are brought home.

Japanese camera maker Pentax Corp. and optical glass maker Hoya Corp. rose on a report that they would merge operations by Oct. 1 next year. The two firms then announced the move just before the close of trading.

Trade volume rose to 2.1 billion shares from 1.9 billion on Wednesday. Declining shares outnumbered advancers by 971 to 613.

M&A IN FOCUS

Along with stocks with high dividend yields, investors also focused on sectors ripe for consolidation, said Yasuo Yabe, a director of sales at Meiwa Securities.

''Steel stocks are very popular among investors as the industry is attractive from both these aspects,'' he said.

The iron and steel sector rose 1.2 percent, making it one of the biggest percentage gainers among the TOPIX's 33 industry sub-indexes Shares of Sumitomo Metal Industries Ltd. rose 4.9 percent to 493 yen, while Nippon Steel added 0.5 percent to 601.

Investors were betting on increased consolidation as Nippon Steel's announcement came a day after industry leader Arcelor Mittal bought a major steel plant in Mexico, giving the world's largest steel maker a firmer foothold in exports to the United States.

Separately, Merrill Lynch on Wednesday lifted its rating on Sumitomo Metal to ''buy'' from ''neutral'' and raised its target share price for Nippon Steel to 650 yen from 550 yen.

Sumitomo Metal looks likely to benefit from profit improvement in seamless pipes, while Nippon Steel is likely to see better-than-expected demand at home and improving prices abroad, Merrill said.

Trading in Pentax and Hoya shares was halted on the Tokyo Stock Exchange on Thursday afternoon after the Nihon Keizai business daily reported that the two were to merge, but Pentax was up 7.5 percent at 690 yen and Hoya gained 0.5 percent to 4,510 yen.

Shares in Nikko Cordial Corp. bounced by 7.1 percent to 1,237 yen after tumbling for three sessions as regulators said the Japanese brokerage improperly booked 6 million in profits.

But shares of consumer lenders fell after Japan's financial regulator slapped Sanyo Shinpan Finance Co. Ltd with a record 12-day business suspension after finding that employees falsified documents related to legal disputes with borrowers.

Sanyo Shinpan lost 5.5 percent to 3,260 yen.

REUTERS