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Nikkei likely to test 10,500
TOKYO, Japan (Reuters) -- Japan's Nikkei average is expected to extend gains to test the 10,500 mark this week as lagging tech issues could play catch-up with the rest of the market following a batch of upbeat U.S. and Japanese economic data. It finished at 10,343.55 on Friday, a 13-month closing high. Analysts said the time was ripe for another leap for Japanese share prices, probably led by gains in large-cap issues including chip and computer conglomerate Hitachi Ltd. The Nikkei average hit a 13-month closing high on August 21, bolstered by heavy buying by foreign investors. But caution over technical indicators pointing to an overheated rally has since kept some from buying further. "The market was taking a breather for the past six sessions. I think that's enough to move forward," said Kazunori Jinnai, general manager at Daiwa Securities SMBC's equity department. Signs of recovery in Japan initially prompted buying in shares of firms with higher profitability after years of restructuring, such as steel and other material manufacturers. But advances in these stocks, mostly medium-cap issues, have left several large-cap tech issues behind. Traders said the Nikkei would move in a range of between 10,000 and 10,600 after rising 0.61 percent to 10,343.55 last week. Friday's close was just below the August 21 high of 10,362.69, which is 35 percent above the Nikkei's two-decade trough in late April. On Friday, the U.S. blue-chip Dow index closed up 0.44 percent and the tech-laden Nasdaq was up 0.57 percent, boosted by a report showing surprisingly strong growth in manufacturing in the Midwest. Analysts said there was a good chance the Nikkei would test the psychologically-important 10,500 barrier this week as domestic institutional investors, who might feel they have not bought enough, joined the rally. Fanuc Ltd, the world's biggest maker of industrial robots, could be among their picks after it raised half- and full-year earnings forecasts on Friday, citing an improvement in capital spending in the auto and electronics industries. Among others, electronic part makers, such as Kyocera Corp, may benefit from rising IT investment, analysts said. Some said, however, instability in the yen bond market and a rising yen, especially as U.S. Treasury Secretary John Snow visits Tokyo early this week, are a concern. Washington is widely viewed as wanting a weaker dollar as a way of helping its manufacturers. But that would hurt Japanese exporters who, according to a recent Bank of Japan survey of large manufacturers, are estimating the dollar/yen rate will hover at around 117.88 yen for the year to March. On Friday, Japan's upbeat industrial output data helped push the dollar below 116.50 yen and triggered a rise in bond yields. The yield of benchmark 10-year Japanese government bonds rose 3.5 basis points to 1.47 percent on Friday, a few days after it hit an 18-month peak of 1.550 percent. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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