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Tokyo equities may pause after Nikkei rises above 20,000

TOKYO: Tokyo stocks are expected to pause for breath this week after the Nikkei's confidence-boosting rise above 20,000, as sales of cross-held shares balance out the positive effect of new investment trusts.

"The supply-demand balance will remain pretty good with investment trust launches. But whenever the market rallies, it will be hit by unwinding of cross-shareholdings," said Keiko Kondo, strategist at Merrill Lynch Japan Inc.

On Friday, the benchmark Nikkei average briefly rose above the 20,000-point level for the first time in 30 months before closing at 19,763.13. Investors see the average moving between 19,500 and 20,300 this week.

The Nikkei's rise above the 20,000 barrier was helped by an overnight rally in the U.S. Nasdaq market as well as the establishment last week of Japan's largest investment trust.

Nomura AM, the fund management arm of the country's biggest brokerage house, said its "Big Project-N" trust had attracted a massive 792 billion yen ($7.36 billion) in initial subscriptions.

More investment trusts are also scheduled to be launched this week, including one by Daiwa Asset Management with an initial fund ceiling of 300 billion yen.

In the medium term, the Nikkei average is expected to rise further above the 20,000 mark, analysts said.

"With supporting factors like the economic recovery, better corporate earnings and an outflow of funds from postal savings, the Nikkei could be hitting as high as 21,000 by the middle of the year," said Chisato Haganuma, a strategist at Nomura Securities' Financial Research Center.

Japan's Posts Ministry expects 58 trillion yen of postal savings to mature in the business year starting in April, of which 27 trillion yen is expected to be withdrawn as Japanese savers look for higher returns elsewhere.

Market direction in the second half of the year is hard to predict but it will depend on the recovery of Japan's domestic demand, said Koji Hatano, strategist at Sakura Institute of Research.

A series of U.S. interest rate hikes late last year and earlier this month might start slowing down the American economy in the second half of the year, possibly pulling Japanese stocks lower, he added.

Among individual stocks, key information technology issues were expected to keep attracting market attention this week due in part to their position as barometers of the market, traders said.

"Sony, Softbank, and NTT Docomo will remain under the spotlight," said Shinji Fujinaga, equities deputy general manager at Kankaku Securities.

"Especially when you are portfolio managers, you cannot take your eyes off these large capitalisation stocks to keep your fund's performance above market indices."

Sony, the trend setter for high-tech stocks, is poised to challenge the all-time closing high of 30,700, posted on January 4, after finishing the Friday session up 3.84 percent at 29,180.

Sony shares were boosted by an announcement from its games unit last week that it had formed an e-commerce business alliance with domestic retailers and game software manufacturer.

Softbank will also be closely watched after Lehman Brothers last week raised its target share price for the Internet investor to 400,000 yen from 100,000 yen.-Reuters