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New financial year to put Nikkei on firm footing

TOKYO: Tokyo's Nikkei average is likely to kick off trading in the first week of the new business year on a firm footing with institutional investors set to start buying with new annual accounts, market traders said.

In the mid-term they saw the benchmark Nikkei average .N225, which on Friday ended the 1999/2000 business year up 28.4 percent from a year earlier, to trade firmer on expectations of new money flowing into the stock market from maturing postal savings.

The Nikkei finished Friday down 0.51 percent on the day at 20,337.32.

"Inspired by maturing postal savings, various efforts are going on now in the market to lure money from individual investors into equities. This will surely be a plus for the market," said Keiko Kondo, a strategist at Merrill Lynch.

Some 106 trillion yen in postal savings is due to mature over the next two years, setting the scene for various investment products to fight for new money.

While some market watchers argue that funds from the maturing postal savings are conservative and risk-averse, it is widely believed that part of the cash will find its way into the market through investment trusts, if not by direct investment in individual stocks.

Tokyo stocks are also expected to be supported by growing expectations of a continuing Japanese economic recovery.

The government said last week Japan's industrial output rose 3.0 percent in February from the previous month. Although the figure was in line with expectations, it confirmed for some investors the bullish outlook for the nation's economy.

The upbeat view was reinforced when Japan's Economic Planning Agency chief Taichi Sakaiya said on Friday that a strong rise in wage earners' household spending in February showed the economy may have grown considerably in the January-March quarter.

Spending by Japanese wage earner households in February rose a real 3.8 percent from the previous year to the highest level in almost three years, although most of the increase was put down to the extra day created by the leap year.

A Reuters survey of 20 market specialists showed that on average they expected the Nikkei to move in a range between 19,250 and 22,000 during the three months to June.

Traders said core technology and blue-chip shares, such as Sony Corp 6758, mobile phone giant NTT Docomo 9437 and Toyota Motor Corp 7203 were likely to remain the major support for the market through the new business year.

"Some domestic-demand related laggards such as machinery manufacturers and chemical firms may gain some ground as the economy recovers. But the main engine behind the Tokyo market remains key infotech stocks and international blue chips," said Koji Hatano, a strategist at Sakura Institute of Research.

On Monday, market players will be eagerly watching the outcome of the Bank of Japan's "tankan" survey of corporate sentiment.

A Reuters survey showed the median forecast for the major manufacturers' diffusion index is seen at minus 10, an improvement over minus 17 in the previous survey taken in December.

Market attention was also focused on the performance of key Internet stocks such as Softbank Corp 9984.T and Hikari Tsushin Inc 9435, which have swung wildly since mid-February due to reasons that included a downward earnings revision and profit-taking ahead of the end of the financial year.

Traders, who saw the Nikkei average moving between 19,900 and 20,900 this week, said investors were increasing cautious over high volatility shown by many high-flying Internet stocks.-Reuters