ASIA MARKETS: Japan's Nikkei Jumps 3.5%; Shanghai Stocks Rebound

By V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) -- Japanese stocks shot higher Friday, outrunning other Asian markets by a wide margin, as an overnight advance on Wall Street and a weakened yen combined with upbeat industrial-production data to lift sentiment.

The Nikkei Stock Average rose 3.5% during the session, further stretching its 3% rally the previous day. The performance helped the benchmark pare its monthly loss in June to 0.7%. In the first half of 2013, however, the Nikkei still remains the best performer among regional benchmarks with a gain of 31.6%.

The broader Topix improved by 3.2%, as the U.S. dollar (USDJPY) jumped briefly rise above the Yen99-handle, with analysts eyeing further weakness for Japan's currency.

A third straight day of gains for the Dow Jones Industrial Average (DJI) on Thursday, amid fading fears the Federal Reserve would cut its bond purchases, set the tone for a further advance in Asian markets Friday.

"Yen volatility has been hard to handle, but after a big washout, a clearer signal from the [U.S. Federal Reserve] and evidence of declining volatility, there is a [case] for fresh short positions," said Nomura strategist Jens Nordvig.

Data released Friday painted a mostly strong picture of economic conditions in Japan, providing a further lift. Industrial output for May saw a particularly robust gain, rising 2% to trounce expectations for a 0.2% improvement.

Shares of Sumitomo Mitsui Trust Holdings Inc. (SMFJY) soared 8.2%, Sharp Corp. (SHCAY) rose 8.1%, Mitsubishi Estate Co. (MITEY) climbed 6.7%, Fast Retailing Co. (FRCOY) added 6.2% and Mazda Motor Co. (MZDAY) rose 4.6% in a rally that touched most sectors.

Shares of Renesas Electronics Corp. (RNECY) added 3.4%, after the chip maker said late Thursday it would withdraw from most of its loss-making mobile operations, according to Kyodo News.

Most other Asian stocks rise

Elsewhere in Asia, South Korea's Kospi climbed 1.6% after jumping 2.9% the previous day, Hong Kong's Hang Seng Index added 1.8%, and Australia's S&P/ASX 200 slipped 0.2%.

China's Shanghai Composite jumped 1.5% for its first higher finish in eight trading days. The index, however, ended June with a hefty loss of 14%, amid worries about the recent rise in interbank money market rates and on slowing momentum in the wider economy.

"China's interbank liquidity was severely squeezed in teh past few weeks. ... We believe it is time for markets to calm down now and that the worst is probably behind us," said Ting Lu, China economist at Bank of America Merrill Lynch.

Stock gains in Shanghai were aided by a further rebound in most banks from heavy recent losses, with property firms also rising.

China Minsheng Banking Corp. (CMAKY) climbed 4.4%, paring the loss so far this week to 9.3%, while Bank of Communications Co. (BCMXY) rose 1.8%, narrowing its weekly drop to 4%.

In Hong Kong, gains were spread wider, with China Life Insurance Co. (LFC) rising 2.5%, China Overseas Land & Investment Ltd. (CAOVY) gaining 4.6%, and personal-products maker Hengan International Group Ltd. advancing 7.2%.

In Seoul, auto makers and financial stocks advanced, with Hyundai Motor Co. (HYMTF) gaining 3.4%, and Shinhan Financial Group Co. (SHG) rising 1.5%.

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