Japan’s Nikkei settles at 5-month closing high on optimism for corporate growth

(Updates with closing prices)

TOKYO, Dec 27 (Reuters) – Japan’s Nikkei share average ended at a five-month closing high on Friday, as investors bet on corporate growth in the coming year, with recent automakers’ news lifting sentiment.

The Nikkei jumped 1.8% to 40,821.16, its highest close since July 17. The index gained for a third session and rose 4% this week, the strongest weekly performance since September.

The broader Topix rose 1.26% to 2,801.68.

“The market cheered recent news of domestic firms, such as merger talks between Honda and Nissan. That drove expectations that Japanese firms will continue to improve investor returns,” said Kentaro Hayashi, senior strategist at Daiwa Securities.

Honda Motor and Nissan Motor said this week they are in talks to merge by 2026, a historic pivot for Japan’s auto industry that underlines the threat Chinese EV makers now pose to the world’s long-dominant legacy car makers.

Honda rose 2.07%, while Nissan, which has risen 42% so far this month, slipped 7.82%.

Toyota Motor advanced 1.4%, becoming the biggest source for the Topix’s gain. The shares rose for a third session after local media reported this week the automaker would double its return on equity target to 20% by around 2030.

A surprise unsolicited takeover bid by Japanese manufacturing giant Nidec for Makino Milling Machine also drove expectations for better returns, said Hayashi.

Shares of Makino surged 19.35% to close at a daily limit of 9,250 yen, which is lower than Nidec’s offer price of 11,000 yen. Nidec jumped 4.14%.

Uniqlo-brand owner Fast Retailing rose 2.7%, giving the biggest boost to the Nikkei. Chip-testing equipment maker Advantest rose 3.87%.

Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Intelligence Laboratory, said the momentum was strong as retail investors’ sales were done by Thursday, the last day for the delivery of stocks for 2024.

Of the more than 1,600 stocks trading on the Tokyo Stock Exchange’s prime market, 82% rose and 15% fell, with 1% flat.

(Reporting by Junko Fujita; Editing by Savio D’Souza)