Nikkei ends at 3-wk high on blue chips, Hitachi up

Tokyo, Mar 22: The Nikkei average climbed 1.49 percent to end at its highest close in three weeks on Thursday, as Canon Inc. and other blue-chips gained on chances that the Federal Reserve may cut interest rates to support the world's largest economy, a key market for Japanese goods.

Shares of Hitachi Ltd. rose 3.1 percent on restructuring plans for its struggling hard disk drive (HDD) business, while property shares extended gains ahead of government land price data due later in the day.

The Federal Reserve kept benchmark interest rates unchanged at 5.25 percent on Wednesday and dropped an explicit reference to the possibility of taking rates higher in a statement after the meeting, sparking a surge on Wall Street.

''As the U.S. monetary authority indicated a possibility of rate cuts, more investors now share the view that the market is bottoming out,'' said Tsuyoshi Segawa, an equity strategist at Shinko Securities.

The Nikkei rose 256.00 points to 17,419.20, the highest close since March 1. The broad TOPIX index rose 1.38 percent to 1,731.80.

The Nikkei has now recouped about half the losses it booked three weeks ago when falls in Chinese shares touched off a global sell-off.

Investors regained confidence in the market, scooping up shares such as steel, but Hideo Ueki, chief investment officer at UBS Global Asset Management Japan, was one of those who remained cautious.

''Long-term interest rates are low and borrowing costs are cheap, which makes an argument that stocks are better than bonds,'' Ueki said. But against global counterparts, Japanese stocks look expensive with the Nikkei average trading at a price-earnings ratio of 21 compared with 16 for the Dow Jones average and 12 for London's FTSE 100 ''The market is driven by liquidity and this situation will likely continue, but you have to pay attention to fundamentals,'' Ueki said.

Trade was active with to 2.2 billion shares changing hands on the first section compared with a daily average volume of 2.7 billion shares in February. Advancers outnumbered decliners by a ratio of seven to one.

Exporters Up

Shares of Canon, which makes three-quarters of its sales outside Japan, rose 1.7 percent to 6,540 yen and Sony Corp. added 1.5 percent to 6,180 yen.

In the property sector, industry leader Mitsui Fudosan Co.

Ltd., was up 1.2 percent at 3,400 yen, extending gains for a third day, while second-ranked Mitsubishi Estate Co. Ltd. added 1.3 percent to 3,830 yen.

Steel stocks continued to lure buyers for their earnings prospects, attractive dividends and chances of industry consolidation.

Nippon Steel Corp. surged 4.5 percent to 866 yen and JFE Holdings Inc. added 3.6 percent to 7,400 yen.

A notable faller was Chugai Pharmaceutical Co., which dropped 1 percent to 2,950 yen after the government warned that the influenza drug Tamiflu should not be given to teenagers after reports of abnormal behaviour.

Reuters