Nikkei nears 7-year high, Nikko jumps

TOKYO, Feb 26 (Reuters) The Nikkei share average rose to its highest in nearly seven years on Monday, gaining 0.54 percent as Softbank Corp., Nippon Steel Corp. and other firms popular with retail investors benefited from improving market sentiment.

Shares of Nikko Cordial Corp., Japan's third-largest brokerage, shot up 15 percent to 1,392 yen. Citigroup is in talks to buy a one-third stake in Nikko, which faces a possible delisting due to an accounting scandal, financial industry sources told Reuters on Saturday.

Retail investors, many of whom were hit with big losses in last year's small-cap sell-off, were now returning to stocks, lured by the prospect of higher earnings from leading companies such as Nippon Steel Corp., analysts said.

''With the rebound of Sony Corp and steel companies, individual investors have bounced back a lot,'' said Katsuhiko Kodama, senior strategist at Toyo Securities.

The Nikkei was up 97.96 points at 18,286.38 as of 0109 GMT after earlier hitting 18,300.39, its highest since May 2000.

The broad TOPIX index was up 0.40 percent at 1,822.18.

Mobile telephone provider Softbank, a favourite of Japanese retail investors, rose 3.1 percent to 3,030 yen.

Nippon Steel gained 2.7 percent to 843 yen.

Shares of Nissan Chemical Industries Ltd. jumped 8.3 percent to 1,591 yen after brokerage Goldman Sachs raised its rating on the chemical manufacturer to ''buy'' from ''neutral'', citing its prospects for earnings growth.

Goldman Sachs said in a note on Friday the company's earnings growth was likely to outpace the industry average in the next year.

REUTERS SBA RN0659