Tuesday, July 12, 2011

Tokyo stocks flat, BOJ's ETF buying helps mood

(Reuters) - Japanese stocks were flat on Wednesday as investors, emboldened by the central bank's purchases of exchange-traded funds, hunted for bargains, offsetting worries about euro zone debt woes that have led to renewed strength in the yen.

The Bank of Japan purchased 22.1 billion yen ($275 million) in Japanese ETFs the previous day, part of its asset-buying scheme to support the economy, and it has typically bought whenever the Nikkei stock average falls more than 1 percent, as it did on Tuesday.

"A further sell-off seems to have stopped for now," said Yumi Nishimura, a senior market analyst at Daiwa Securities, adding that the central bank's move was reassuring to investors.

As European debt woes mounted, the dollar briefly plunged below 79.00 yen for the first time since mid-March, before recovering to around 79.40 yen. The euro stood at 111.37 yen after dropping 1.4 percent to 110.98 yen.

"People are now used to seeing the dollar dipping below 80 yen, but the question is whether this strong yen trend is temporary or is it one that will last for a while," said Yutaka Miura, a senior technical analyst at Mizuho Securities.

"If it lasts for a week, the Nikkei may fall toward 9,500."

The benchmark Nikkei .N225 was flat at 9,926.81 at the midday break after rising as high as 9,973.23, while the broader Topix index .TOPX added 0.2 percent to 858.92.

Moody's cut Ireland's credit rating to junk on Tuesday, warning that the debt-laden country would likely need a second bailout, while European officials, for the first time, refused to rule out default by Greece.

Investors fear the crisis could overtake the bigger European economies of Spain and Italy, though some Tokyo-based fund managers were hopeful that the impact on domestic equities would be limited.

"While such global economic fears remain, there are hopes for strong earnings for the April-June quarter, so the Tokyo market may not fall sharply this month," said Naoki Fujiwara, a fund manager at Shinkin Asset Management.

Chip-related shares slipped after Microchip Technology Inc (MCHP.O) tumbled 12 percent on Tuesday, a day after the chipmaker cut its first-quarter outlook hurt by lower automotive production and weakness in consumer and computing end markets.

Advantest Corp (6857.T) shed 0.9 percent to 1,515 yen in active trade, while Tokyo Electron (8035.T) fell below its 25-day moving average, losing 1.1 percent to 4,320 yen. Tokyo Seimitsu (7729.T) dropped 2.2 percent to 1,495 yen.

But some exporters rose on bargain hunting, with Toshiba Corp (6502.T) rising 1.0 percent to 416 yen and Sony Corp (6758.T) adding 0.3 percent to 2,143 yen.

Shares of Mitsui & Co (8031.T) made their biggest daily gain in the last three weeks, adding 2.3 percent to 1,435 yen, after the trading house said it would launch a rival offer for Singapore port operator Portek International (PKIL.SI), outbidding Philippines' International Container Terminal Services Inc (ICT.PS).

Shares in mobile social gaming company DeNA (2432.T) gained 2.0 percent to 3,765 yen after Morgan Stanley Mitsubishi UFJ Securities hiked the firm's rating to "overweight" from "equal weight," citing its overseas expansion and attractive valuations.


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