20000214

Nikkei seen easing after rally

TOKYO: Tokyo stocks are expected to tread slightly softer ground this week on corporate selling of cross-held shares and profit-taking after the benchmark Nikkei's foray above the 20,000 barrier last week.

The sharp fall in U.S. high-tech shares on Friday would also trip up the Tokyo market at the start of the week, traders said.

But most said losses should be limited during the week on hopes new investment trusts would continue to pour individual investors' money into the equities market.

Traders expect the Nikkei to trade in a wide range from 19,000 to 20,100.

The benchmark average finished on Thursday, the last trading day of last week, at 19,710.02, down 0.27 percent on the week. It had hit an intraday high on Wednesday at 20,046.14, a level not seen since July 1997.

The market was closed on Friday for the National Foundation Day holiday.

Many said the market still needed to settle down after its somewhat hasty foray over the psychologically key 20,000 barrier.

"There is often unwinding of cross-held shares in the second and third weeks of February in preparation for March book closings, and this year should be no exception," said Masayoshi Okamoto, a trader at Jujiya Securities.

Corporate Japan has been trying in recent years to shake off the often costly practice of mutual shareholding.

Selling of such shares, often cheaper stocks in traditional industries, is likely to continue weighing on the market.

Such pressures intensified when the Nikkei climbed above the 20,000-point barrier last week and would remain strong this week as institutional investors cash in profits ahead of book closing at the end of March, traders said.

High-tech and information technology shares, which had surged in the past couple of months, were likely targets, they said.

But many expect blue-chips such as Sony Corp and Fujitsu Ltd to be supported by expectations that they will be heavily represented in the portfolios of the new trusts.

Around a dozen new investment trusts are due to be launched this month, worth a total of up to 950 billion yen.

Daiwa Asset Management launched a new trust with a focus on value stocks last Thursday, attracting 42.42 billion yen in initial subscriptions.

Although small in comparison with Nomura Asset Management's "Big Project-N" trust that attracted 792.475 billion yen in initial subscriptions the week before, investors say the new fund has sparked buying interest in undervalued issues.

However, in the near term, traders are likely to be keeping a nervous eye on Wall Street with the Nikkei particularly vulnerable to movements in the U.S. stock market.

"The market was cautious on Thursday ahead of the long weekend," said Katsuhiko Kodama, head of equities at Toyo Securities. "It will still be very dependent on Wall Street for direction."

The Dow Jones industrial average dropped 2.05 percent to 10,425.21 on Friday, its lowest close since October 27. The Nasdaq composite index fell 2.01 percent to 4,395.45 a day after it closed at a new high of 4,485.63.-Reuters