Japan's Nikkei average went above 10,000 on Tuesday for the first time since August, but ended well below that key level despite better-than-expected machinery orders data as overheating fears weighed on the market.
The Nikkei briefly darted above 10,000 in the morning on bullish brokerage comments on the chip sector and regained that line after the machinery figures, but investors sent it back down on profit-taking, worried that the rise had been too fast.
The benchmark index ended up 1.06 percent at a 10-month closing high of 9,898.72 after earlier rising as high as 10,027.60, more than 30 percent above a 20-year closing low of 7,607.88 struck on April 28. The broader TOPIX index ended up 0.96 percent at 976.30.
"The machinery figures were surprising, but much of the boost the market could hope to get from them already occurred after the 'tankan' capital spending figures last week," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Securities.
"Profit-taking and other factors are making it difficult to maintain 10,000...and from a valuations standpoint, Tokyo is no longer really looking cheap or a laggard compared to New York."
Tokyo's recent heady rally was aided by heavy buying by foreign investors, many of whom were attracted by Tokyo's relatively cheap valuations and laggard status compared with other world markets rather than economic fundamentals.
But some analysts expressed concern on Tuesday with stocks in the Nikkei trading at almost 24 times forecast earnings per share compared with 17.7 times for the Standard & Poor's 500.
Tokyo's rise since late April has also far outstripped the Dow Jones industrial average over the same period.
"What is driving the rise right now is the high volume and the short-term popularity of certain stocks, rather than fundamentals," said Masaharu Sakudo, an adviser at Tachibana Securities. "The rises of Softbank and the like are a bit difficult to explain from a pure fundamentals standpoint."
Volume on the first section totaled 1.76 billion shares, making Tuesday the 29th straight session with over a billion shares traded, the longest such run since a five-day trading week was launched in 1989. Decliners outnumbered gainers, 815 to 622.
Traders said the volume was encouraging individual investors to snap up Internet investor Softbank Corp and other volatile Web sector stocks, in hopes of profiting from the rally.
Softbank, the most heavily traded issue by value, rose for a 10th straight session, gaining 16.29 percent to 3,570 yen. Yahoo Japan Corp, 42 percent owned by Softbank, was up 10.26 percent at 2.15 million yen, also boosted by hopes for good earnings results from Yahoo Inc later in the week.
STILL AN ATTRACTIVE PLAY?
Although some players fretted over the economic basis for Tuesday's rise, the afternoon machinery report suggested Japan's economy might be in better shape than many had imagined, helping keep some of the morning gains sparked by improving chip sector sentiment.
Tokyo Electron Ltd, Japan's top producer of chipmaking equipment, rose 8.28 percent to 7,320 yen, after bullish comments from top brokerages on the chip sector and a sales report from Taiwan Semiconductor Manufacturing Co pushed the U.S. Nasdaq to a near 14-month high on Monday.
The data on core private-sector machinery orders also eased some fears about Japan's economy. Orders rose 6.5 percent in May from a month earlier on a seasonally adjusted basis, compared with a median forecast for a fall of 1.3 percent in a Reuters poll of 22 economists last week.
"This is obviously a positive for stocks, coming on the back of the encouraging 'tankan' figures," said Tsuyoshi Nomaguchi, strategist at D summer, particularly if volume drops, others are not convinced Tokyo is now an unattractive play from a valuations standpoint.
"Japan is clearly the cheapest market of the three major regions, particularly if you look at ratios like price to book and price to cash flow," said Garry Evans, chief strategist at HSBC Securities.
"By the end of the year I'd be looking for the Nikkei to hit around 11,500 -- that still only takes it back in valuation terms to the very bottom of its historical valuation range of 11 or 12 times price to operating earnings."
The Nikkei briefly darted above 10,000 in the morning on bullish brokerage comments on the chip sector and regained that line after the machinery figures, but investors sent it back down on profit-taking, worried that the rise had been too fast.
The benchmark index ended up 1.06 percent at a 10-month closing high of 9,898.72 after earlier rising as high as 10,027.60, more than 30 percent above a 20-year closing low of 7,607.88 struck on April 28. The broader TOPIX index ended up 0.96 percent at 976.30.
"The machinery figures were surprising, but much of the boost the market could hope to get from them already occurred after the 'tankan' capital spending figures last week," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Securities.
"Profit-taking and other factors are making it difficult to maintain 10,000...and from a valuations standpoint, Tokyo is no longer really looking cheap or a laggard compared to New York."
Tokyo's recent heady rally was aided by heavy buying by foreign investors, many of whom were attracted by Tokyo's relatively cheap valuations and laggard status compared with other world markets rather than economic fundamentals.
But some analysts expressed concern on Tuesday with stocks in the Nikkei trading at almost 24 times forecast earnings per share compared with 17.7 times for the Standard & Poor's 500.
Tokyo's rise since late April has also far outstripped the Dow Jones industrial average over the same period.
"What is driving the rise right now is the high volume and the short-term popularity of certain stocks, rather than fundamentals," said Masaharu Sakudo, an adviser at Tachibana Securities. "The rises of Softbank and the like are a bit difficult to explain from a pure fundamentals standpoint."
Volume on the first section totaled 1.76 billion shares, making Tuesday the 29th straight session with over a billion shares traded, the longest such run since a five-day trading week was launched in 1989. Decliners outnumbered gainers, 815 to 622.
Traders said the volume was encouraging individual investors to snap up Internet investor Softbank Corp and other volatile Web sector stocks, in hopes of profiting from the rally.
Softbank, the most heavily traded issue by value, rose for a 10th straight session, gaining 16.29 percent to 3,570 yen. Yahoo Japan Corp, 42 percent owned by Softbank, was up 10.26 percent at 2.15 million yen, also boosted by hopes for good earnings results from Yahoo Inc later in the week.
STILL AN ATTRACTIVE PLAY?
Although some players fretted over the economic basis for Tuesday's rise, the afternoon machinery report suggested Japan's economy might be in better shape than many had imagined, helping keep some of the morning gains sparked by improving chip sector sentiment.
Tokyo Electron Ltd, Japan's top producer of chipmaking equipment, rose 8.28 percent to 7,320 yen, after bullish comments from top brokerages on the chip sector and a sales report from Taiwan Semiconductor Manufacturing Co pushed the U.S. Nasdaq to a near 14-month high on Monday.
The data on core private-sector machinery orders also eased some fears about Japan's economy. Orders rose 6.5 percent in May from a month earlier on a seasonally adjusted basis, compared with a median forecast for a fall of 1.3 percent in a Reuters poll of 22 economists last week.
"This is obviously a positive for stocks, coming on the back of the encouraging 'tankan' figures," said Tsuyoshi Nomaguchi, strategist at D summer, particularly if volume drops, others are not convinced Tokyo is now an unattractive play from a valuations standpoint.
"Japan is clearly the cheapest market of the three major regions, particularly if you look at ratios like price to book and price to cash flow," said Garry Evans, chief strategist at HSBC Securities.
"By the end of the year I'd be looking for the Nikkei to hit around 11,500 -- that still only takes it back in valuation terms to the very bottom of its historical valuation range of 11 or 12 times price to operating earnings."
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