ASIA MARKETS: Japan Stocks Recover Modestly After Steep Sell-off

By V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) -- Japanese stocks jumped Friday amid expectations that the rally that began late last year may have further to go, with relief buying emerging after the extreme losses Tokyo suffered the previous day.

Most other regional markets also bounced after Thursday's sell-off, although Australian shares skidded on extended losses for the banking and resource sectors.

The Nikkei Stock Average climbed 2.7% in Tokyo after diving 7.3% in the previous session, while the broader Topix advanced 2.5% after Thursday's 6.9% plunge.

"Thursday's stomach-turning correction in Japan and Asia ultimately strikes us mostly as a 'mere' step-back .... on a continuing upward path for Japanese and Asia-Pacific equities," said Nomura Securities equity strategist Michael Kurtz.

The Nikkei Average is still up more than 60% since the beginning of November 2012.

A recovery in the U.S. dollar (USDJPY), which moved back above the Yen102 level after slipping below Yen101 on Thursday, helped to lift exporters, with financials also taking back some of their losses.

The bounce in equities also preceded Bank of Japan Gov. Haruhiko Kuroda's scheduled appearance before lawmakers later in the day. Kuroda's testimony comes amid concerns about upward pressure on Japanese government bond (JGB) yields, despite the central bank's plans to buy up JGBs on an unprecedented scale.

Thursday's plunge in Japanese equities occurred against a backdrop of extreme volatility in the bond market, which forced the Bank of Japan to step in and offer funds to soothe investor nerves.

Still, some analysts said the recent spike in Japanese sovereign yields didn't undermine the Bank of Japan's credibility.

"The spike in JGB yields has raised the concern that markets might already be challenging the Bank of Japan's new quantitative-easing policy. But in sending yields much higher while moderately buying the yen at the same time, the market discounted brighter nominal [economic] growth, rather than challenged policy credibility," Société Générale global head of foreign-exchange sales Sebastian Galy wrote to clients.

In Thursday's trading in Tokyo, stocks across the board saw buying support.

Shares of Mazda Motor Corp. (MZDAY) climbed 7.2%, Shinsei Bank Ltd. (SKLKF) jumped 6.1%,mobile-service provider Softbank Corp. (9984.TO) rose 3.8%, real-estate major Mitsui Fudosan Co. (8801.TO) gained 3.2% and insurer Dai-ichi Life Insurance Co. rose 3.2%.

Other regional markets

Elsewhere in the region, South Korea's Kospi and China's Shanghai Composite gained 0.3% each, and Taiwan's Taiex edged up 0.2%, also recovering from Thursday's losses.

Australia's S&P/ASX 200 fell 0.7%, dropping further amid worries about Chinese economic growth after disappointing preliminary results from HSBC's survey on manufacturing activity in China.

Hong Kong's Hang Seng Index was 0.1% higher after moving in and out of negative territory.

Financial stocks declined in Sydney amid worries about the economic outlook. Commonwealth Bank of Australia (CBAUY) and National Australia Bank Ltd. (NABZY) dropped 1.1% each.

Some resource-sector stocks dropped in Sydney amid lingering concerns about demand in the wake of Thursday's China manufacturing data.

BHP Billiton Ltd. (BHP) lost 1%, with Woodside Petroleum Ltd. (WOPEY) also down 1%.

However, Newcrest Mining Ltd. (NCMGF) rose 3.5% after gold futures rallied overnight.

Shares of Echo Entertainment Group Ltd. plunged 10.5% after Crown Ltd. sold a 10% stake in the casino operator.

In Hong Kong, shares of Lenovo Group Ltd. (LNVGY) jumped 4.2%, on top of the 2.9% advance Thursday in the wake of a 34% jump in annual profit for the computer maker.

But some property developers and insurers mostly fell to keep the market under pressure, with China Overseas Land & Investment Ltd. (CAOVY) losing 1.7% and China Life Insurance Co. (LFC) down 1%.

Developer Cheung Kong Holdings Ltd. (CHEUY) fell 2.2% as the stock traded without rights to a dividend.

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