TOKYO, Aug 14 - Japanese stocks gained momentum in Thursday afternoon trade after ending the morning mixed, as investors kept up their appetite for paper makers and other cyclicals after surprisingly strong GDP figures this week. The Nikkei average <.N225> was up 1.30 percent at 9,879.81 at 0502 GMT, rebounding after closing the morning down 0.03 percent. The index had climbed more than five percent in the past four sessions to Wednesday's two-week closing high. The broader TOPIX index <.TOPX> was up 1.29 percent at 964.04. Cyclical stocks including top paper maker Oji Paper Co <3861.T> continued to gain following surprisingly strong gross domestic product data earlier this week, which sparked heavy buying by foreign investors betting on an economic recovery.
"This trend of buying cyclicals looks like it has some staying power, particularly because it is something that is not just specific to Japan right now," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Securities. "If you look at the U.S. stocks that are popular right now, it's not the Nasdaq shares...it's firms like International Paper, Dow Chemical, 3M, Caterpillar and the like -- foreigners are buying those in New York, and seem to be eyeing their counterparts in Japan as well." Reflecting that sentiment, Oji extended its gains in the afternoon to 607 yen, a 6.87 percent rise, while rival Nippon Unipac Holding <3893.T> faired even better, rising 7.59 percent to 510,000 yen. The iron and steel sector <.ISTEL.T> showed it was not yet ready to succumb to profit-taking despite a blistering 5.53 percent rise on Wednesday.
Top steel maker Nippon Steel Corp <5401.T> put on 1.52 percent to a 13-month high of 201 yen, while third-ranked Sumitomo Metal Industries Ltd <5405.T> rose 3.53 percent to match its year-to-date high of 88 yen. "Investors really like basic materials and other cyclicals now and I don't expect that trend to change any time soon," said Akio Yoshino, general manager at SG Yamaichi Asset Management. In a week that was supposed to see limited activity due to Japan's "obon" holidays, investors continued to pour money into banks and other sectors affected by swings in the economy. Japan's fourth-ranked bank, UFJ Holdings Inc <8307.T>, was up 6.02 percent at 282,000 yen, tacking on to a 9.47 percent jump on Wednesday.
Besides the GDP figures, sentiment towards UFJ has been boosted by its announcement on Tuesday that its outstanding bad loans fell to 3.99 trillion yen by the end of June from 4.16 trillion yen at end-March. Elsewhere, Seiko Epson Corp <6724.T> rose 3.67 percent to 3,390 yen after Morgan Stanley Capital International Inc (MSCI) on Wednesday added the electronics maker to its Japan index, sparking expectations of buying by MSCI-benchmarked funds. But some blue chip issues such as Fuji Photo Film Co Ltd <4901.T> came under selling pressure after the U.S. Dow Jones industrial average <.DJI> shed 0.41 percent due to a surge in bond yields. Japan's top photo film maker dipped 2.63 percent to 3,330 yen.//