Japanese shares edge higher as hopes for economic rebound boost cyclical stocks

TOKYO, March 3 (Reuters) - Japanese shares ended marginally higher on Wednesday, as investors picked up cyclical stocks on hopes of a quicker economic recovery from the pandemic-led recession.

However, gains were capped by worries about bond market volatility and talk of huge selling for rebalancing this month.

The Nikkei average rose 0.51% to close at 29,559.10, while the broader Topix gained 0.51% to 1,904.54.

“With the vaccine rollouts globally, expectations for the economic normalization is growing. That is prompting investors to buy economic sensitive shares,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Iron and steel sector rose the most among 33 sector sub-indexes on the Tokyo exchange. Kobe Steel surged 9.09%, making it the biggest gainer in Nikkei. Nippon Steel jumped 6.76%, while JFE Holdings soared 8.36%.

Topix Value Index rose 1.27% as growth-oriented shares lost 0.25%, led by declines in high-flying momentum shares as well as chip-related stocks, in a sign of investor caution against their lofty valuation.

Electric-motor maker Nidec fell 3.03%, while medical portal operator M3 lost 1.72%. Chip-making machine maker Tokyo Electron shed 1.22%.

As the Topix has risen about 35% so far in the current Japanese financial year ending on March 31, market players are getting wary the country’s pension funds could sell a large amount of shares for rebalancing by the financial year-end.

Many investors are still not sure whether a sell-off in global bonds, which hit the market in recent weeks, is over, despite signs of some stability in the last few sessions.