Nikkei rebounds as Sony surges on broker upgrade

TOKYO, Jan 9 (Reuters) The Nikkei average rebounded from an early fall on Tuesday, rising 0.7 percent as shares of Sony Corp. surged after brokerage Goldman Sachs lifted its rating on the electronics maker to ''buy''.

But Fast Retailing Co. Ltd. declined after the casual clothing chain said its same-store sales fell more than 3 percent last month.

Speculation the Bank of Japan could raise interest rates as soon as next week was also pushing some investors to take a cautious stance.

Shares of Sony jumped 5.4 percent to 5,490 yen after Goldman upgraded its rating to ''buy'' from ''neutral'' and its target share price to 6,200 yen from 5,150 yen, citing strong Christmas sales and the possibility of additional restructuring plans.

''Because this is a Goldman upgrade, everyone is paying attention,'' said Ken Masuda, senior dealer in equities at Shinko Securities.

The upgrade was also helping to ease concerns about the outlook for the company's next-generation game console, the PlayStation3, Masuda said.

''If you look at the report, it appears that they have factored in all the bad news about the PS3 ... this is something that is worth watching.'' The Nikkei finished the morning up 118.54 points at 17,210.13, after earlier slipping below the 17,000 mark for the first time since Dec. 22.

The broader TOPIX index was up 1.00 percent at 1,692.08.

Japanese markets were closed on Monday for a national holiday.

SELL-OFF OVERDONE? Many investors were betting that Friday's sell-off of 1.5 percent on the Nikkei was likely overdone, especially given optimistic views for 2007, said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

''There's a feeling that right now the market isn't going to head a lot lower on this,'' Ogawa said.

Nonetheless, there was still some caution due to speculation about an interest rate rise.

''Investors aren't willing to take an aggressive stance at the moment as the Bank of Japan may raise rates next week,'' Ogawa said.

Higher rates are seen as a negative for stocks as they increase borrowing costs and crimp consumer spending.

Fast Retailing fell 2.7 percent to 11,330 yen. The operator of the Uniqlo chain of casual clothing stores said same-store sales fell 3.3 percent year on year in December due to warm weather.

Shares of Pioneer Corp. were also boosted by a Goldman upgrade, with the electronics maker surging 3.9 percent to 1,714 yen after Goldman said in a report on Friday that it had lifted its rating on the stock to ''neutral'' from ''sell'', noting recent share price falls.

Trade was relatively active, with 1.01 billion shares changing hands on the Tokyo exchange's first section.

Advancers beat decliners by a ratio of more than three to one.

REUTERS LL VC1020