Foreigners Increase Net Purchase of Japanese Stocks; Nikkei Up 1.1%

Nigel Thomas
25 Mar, 2011
New York City

Stocks in Japan rebounded on Friday 1.1% and for the week 3.6% as foreign investors increase their net purchase to the record last seen seven years ago. Automakers plan to increase more output but remain quiet with the parts situation. The rebound lifted construction related stocks.

[R]5:00 PM Tokyo – Stocks in Japan rebounded on Friday 1.1% and for the week 3.6% as foreign investors increase their net purchase to the record last seen seven years ago. Automakers plan to increase more output but remain quiet with the parts situation. The rebound lifted construction related stocks.[/R]

Stocks in Tokyo edge higher on Friday and gained more than 3% for the week as companies downgrade earnings and automakers resume production.

Investors shifted their focus to the reconstruction and foreign investors increase net holdings of Japanese stocks.

The Nikkei 225 Stock Average increased 101.12 or 1.1% to 9,536.13 and for the week increased 3.6%. The broader Topix index added 0.4% to 8573.38 and increased 4.4% for the week.

In trading, 3.15 billion shares changed hands on the main board in Tokyo and price-to-book value for the Nikkei stock traded at 1.1. Nearly 60% of traded stocks in Japan are trading below the book value according to an estimate by Nikko Cordial Securities.

The yen traded at 80.97 to a dollar.

Foreign investors increased a net 891 billion yen or $11 billion in Japanese stocks in the week ending on March 18 according to the data released by the ministry of finance.

Tokyo Stock Exchange also said in its latest data release today foreigner investors bought 955 billion yen more Japanese stocks, the most in seven years.

The latest rally driven by the foreign purchase is not likely to hold gains as domestic investors remain on the sidelines and more selling is expected after ex-dividend date on March 28.

The foreign institutions have steady increased their share of trading on the Tokyo Stock Exchange to 70% this year from 50% only five years.

The recent net additions of Japanese stocks by foreign investors is seen as selective buying to take advantage of the oversold stocks in the aftermath of earthquake and tsunami that has killed at least 9.500 people and damaged a nuclear power plant.

Stock Movers

Construction related stocks were in favor for the second week in a row. Komatsu Ltd added 4.7% to 2,795 yen and IHI gained 6.6% to 193 yen. Ebara Corp increased 4.4% to 431 yen.

Exporters closed higher. Sony Corp increased 3.3% to 2,634 yen and Deutsche Securities increased its rating on the company citing sales gain in its game console business.

Automakers gained after Toyota and Nissan resumed some auto production.

Nissan Motor Co increased 1.5% to 681 yen after it expanded its assembly operation on Thursday and Toyota Motor added 0.9% after it said it will restart production of three hybrid cars in Japan on Monday.

The Tokyo Electric Power Company, Inc declined 6.2% to 846 yen as the company cited some progress in Fukushima nuclear power plant but the resurfacing of more smoke worried investors.