Nikkei flat, steel stocks up but recent gainers dip

TOKYO, Dec 28 (Reuters) The Nikkei share average was flat on Thursday as Nippon Steel Corp. and its peers drew buyers while Canon Inc. and other recent gainers fell on concern that their prices may have advanced too quickly.

Investors unloaded some stockholdings after slightly weaker-than-expected industrial output data and ahead of the New Year holiday. The Tokyo market will be open for a half-day on Friday and resume trading on Jan. 4.

''People are taking profits because you never know if foreign exchange rates might move during the holiday,'' said Yasuo Yabe, a director of sales at Meiwa Securities.

The Nikkei was up 0.06 percent, or 10.25 points, at 17,233.40 as of 0451 GMT. Earlier in the session it topped 17,300, its highest since early May. The broader TOPIX index was up 0.13 percent at 1,679.17.

Yabe added that those aiming for short-term profits flocked to steel stocks. ''Investors are looking for stocks that have cheap valuations and high dividends. Mergers and acquisitions are also another factor, and steel stocks fit all the descriptions.'' Nippon Steel, the world's third-largest steel maker, jumped 4.4 percent to 671 yen, a level it has not seen since 1990.

JFE Holdings rose 1.6 percent to 6,190 yen.

Both stocks currently trade at a PE of 12 to 14, compared with the Nikkei 225's 20.

Data out before the open showed that industrial production rose 0.7 percent in November from the previous month, below a market consensus forecast for a 1.1 percent rise.

Mergers and acquisitions will be one of the main drivers for the stock market ahead, said Takahiko Murai, a general manager of equities at Nozomi Securities.

''Investors are looking for cash-rich companies which can afford to do M&A,'' he said. Cross shareholding is also becoming popular among companies to be prepared for unwanted takeover bids, helping the stock market remain firm, Murai added.

Astellas Pharma Inc. was up 1.7 percent at 5,430 yen after it said it would reduce its treasury stock to between 1 and 2 percent of its outstanding shares this business year, from 8.8 percent.

Ryowa Life Create Co. Ltd. jumped 7.8 percent to 943 yen after a subsidiary of a Lehman Brothers-affiliated investment fund launched a 9 million tender offer for the condominium developer. The fund is offering 950 yen per share.

Canon lost 0.8 percent after hitting this year's high of 6,780 yen last week.

Industrial robot maker Fanuc Ltd. dropped 0.7 percent after rising for two days.

REUTERS CS GC1135