* Nikkei hits 8-mth closing high
* Portuguese bond sale eases sovereign debt worries
* Property, financials lead advance for 2nd straight day
* Nikkei may hit 11,000 in mid term, 12,000 by year end
By Ayai Tomisawa and Antoni Slodkowski
TOKYO, Jan 13 (Reuters) - The Nikkei average rose to its
highest close in eight months on Thursday, buoyed by gains in
undervalued financial shares and advances in European and U.S.
stocks after a successful bond auction in Portugal eased fears
over the euro zone debt crisis.
Financials, which fuelled the Nikkei's climb the day before,
extended gains as foreign investors added underweight banking
stocks to their portfolios. Mitsubishi UFJ Financial Group
<8306.T>, Japan's biggest bank by assets, gained 1.3 percent.
"The financial sector may be buoyed further in the coming
sessions if earnings figures from the U.S. financial sector show
strength," said Hidenori Suezawa, chief strategist at Nikko
Cordial Securities.
The banking sector <.IBNKS.T>, which has gained 25 percent
since November, is still considered undervalued as its
price-to-book ratio stands around 0.7, underperforming the
average PBR of 1.2 for the Nikkei 225 components. A share is seen
as undervalued if the PBR is below 1.0.
The rally in the financial sector could spill over into other
sectors, analysts said.
"After looking into financial firms and confirming recovery
in the corporate sector, the next sector investors may look at
could be leasing if companies decide to increase capital
spending," Chisato Haganuma, chief strategist at Mitsubishi UFJ
Morgan Stanley Securities, wrote in a report.
The property sector <.IRLTY.T> was also among the top
gainers, adding 2.2 percent, as foreign funds piled into real
estate shares supported by the Bank of Japan's asset buying
scheme and as vacancy rates in high-grade buildings in Tokyo fell
in the October-December quarter.[]
The property sector has gained around 20 percent since the
scheme was launched in October, outperforming the Nikkei's 13
percent rise over the same period.
PROPERTY GAINS
"The strong bond auction in Portugal has calmed the markets
and with no major negative factors in sight, foreign funds
continue buying lagging banking and property shares," said
Mitsushige Akino, chief fund manager at Ichiyoshi Investment
Management.
Spain is expected to pay a premium to sell up to 3 billion
euros ($3.94 billion) of five-year bonds on Thursday as it faces
jittery debt markets for the first time this year.
[]
"Foreigners are buying property, encouraged by the BOJ's
scheme and because they seem cheaper compared to surging property
shares in China," said Akino, who predicted that foreign buying
would continue at least until June, provided that exchange rates
remained steady around current levels.
The benchmark Nikkei <> ended up 0.7 percent or 76.96
points at 10,589.76. Immediate resistance looms at the May 13,
2010, high of 10,638.23. The next target eyed by investors is the
10,847.90 mark recorded on May 6.
The broader Topix <> added 0.9 percent to 937.74.
Nikko Cordial's Suezawa said that, if U.S. earnings show
brisk demand for consumer goods, investor interest in exporting
manufacturers such auto and electronics makers could continue
lifting the Nikkei.
"There are hopes that the Nikkei is on track to rise to
11,000 in the medium term and 12,000 by the end of the year," he
said.
Resource and energy shares also posted strong gains as oil
hovered around 27-month highs, with $100 a barrel looming for the
first time since 2008 and as gold prices rose to a one-week high
on Wednesday.
Inpex Corp <1605.T>, Japan's top oil and gas developer,
gained 2.1 percent to 492,500 yen, while trading houses rose.
Marubeni Corp <8002.T>, Japan's No.5 trading house, climbed 2.5
percent to 628 yen and No.4 Itochu Corp <8001.T> added 2.9
percent to 910 yen.
Chuo Mitsui Trust Holdings <8309.T> rose 5.0 percent to 354
yen and Sumitomo Trust & Banking Co <8403.T> gained 5.3 percent
to 537 yen in heavy trade, after the Nikkei business daily said
that the entity to be created in April by merging the two firms
is considering a dividend payout ratio of 30 percent.
[]
The companies were the two biggest percentage gainers on the
Nikkei 225.
Trade was active with around 2.3 billion shares changing
hands on the Tokyo Stock Exchange's first section, above last
week's average daily volume of 2.0 billion shares.
($1=.7613 Euro)
(Editing by Edmund Klamann)
