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Japanese shares reach new four-month high

Japanese shares

Japan’s Nikkei touched a fresh four-month high, led by gains in the big three mobile carriers

Nikkei edged up to a fresh four-month high on Tuesday, propelled by gains in the big three mobile carriers after market leader NTT Docomo announced smaller-than-feared price cuts, soothing concerns about a price war.

The benchmark Nikkei ended the morning session at 22,208.22, up 0.2 percent on the day, after hitting a fresh four-month high earlier in the day.

The information and communication sub-index was by far the strongest among the Topix’s 33 industry groups, gaining 1.9 percent.

NTT Docomo jumped 3.8 percent, while rival and one of the Nikkei heavyweights KDDI Corp surged 5.8 percent and SoftBank Corp advanced 3.1 percent.

After market close on Monday, NTT Docomo said it would cut carrier fees by up to 40 percent. Yet, many of its users will not see reductions of that scale and the new price plans, widely seen as complex, do not include handset fees.

SMBC Nikko analyst Satoru Kikuchi wrote in a note they don’t see a large negative impact on (NTT Docomo’s) earnings and see a low probability of other companies responding with large price cuts.

Japan’s big three telcos have been under government pressure to reduce carrier fees to help stimulate consumer spending in other parts of the economy.

The ongoing rally in the Nikkei is not supported by broad economic growth or fundamentals, but rather by ample liquidity and speculation, said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Fujito said the benchmark Nikkei had been buoyed over the past few weeks by a couple of heavyweight stocks, namely Fast Retailing and SoftBank Group.

He said that looking back, some speculative hedge funds apparently pushed up the Nikkei artificially by buying up heavyweights Fast Retailing and SoftBank Group. If they decide to take profit, it can reverse course anytime soon— unless the markets see solid hard data to back up a further run-up.

In a sign of the market distortion, the Nikkei/Topix (NT) ratio edged up to 13.66, its second highest level on record, after 13.71 touched in late December.

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