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Stocks

Risk-shy investors halfway to recovery

TOKYO -- Although the stock market made a strong showing here Thursday amid easing economic concerns, investors are still only halfway toward fully unshackling themselves from risk avoidance, which is taking the wind out of the resurgence.

A tale of two Yokogawas

After shooting up 500 points, the Nikkei Stock Average settled at a 360-point gain to 16,196. The fortunes of Yokogawa Bridge Holdings, a contractor that makes steel bridges, and Yokogawa Electric best illustrate the divergent trajectories the market took.

     Yokogawa Bridge finished up 9.24% after East Japan Railway said Wednesday that it will invest 1 trillion yen ($8.6 billion) to overhaul bullet train routes, which will likely lead to orders to refurbish aged tunnels and bridges. Construction firm Tekken also closed 10% higher.

     That people are drawn to flavor-of-the-moment stocks "indicates the investor mindset is improving," said Shunichi Otsuka at Ichiyoshi Securities.

     On the other hand, Yokogawa Electric fell to its lowest point since the beginning of last year during intraday trading Thursday. The Japanese industrial equipment maker announced Wednesday it will acquire a British consulting firm to oil and gas companies in a bid to strengthen business with oil plants.

     The market responded unexpectedly harshly to the deal because, unlike railway work, acquisitions of resource-related companies are considered less-clear-cut reasons to buy.

Signs of recovery

However, fears are easing somewhat over the slide in oil prices after Saudi Arabia and Russia agreed to freeze crude output levels.

     For the U.S. outlook, indicators are emerging that lead analysts like Yoshimasa Maruyama at SMBC Nikko Securities to declare consumption strong.

     January container shipments to the U.S. of furniture and other products made in China and Southeast Asia rose 16% from a year earlier to a record 1.17 million 20-foot equivalent units for the month, says U.S. market research firm Datamyne.

     Concerning marine freight, there are signs that the Baltic Dry Index, which tracks shipping fees for bulk carriers, has bottomed out. Chinese iron ore imports are growing, though they still pale in comparison to the past. Freight fees are finally bouncing back from the pessimism-fueled slump, said a source at a major shipping company.

     The Nikkei average lost roughly 2,900 points in the 12 days to Feb. 12, but has regained 1,200 points since. If the index reaches the halfway recovery point of 16,408, "the 17,000 level will be in sight," said Takatoshi Itoshima of Commons Asset Management.

     But many still find it difficult to trade stocks at this stage with prices whipsawing. DIAM Assent Management's Cruise Control fund still parks 90% of its holdings in cash, and the ratio will not come down unless volatility comes under control, said the fund's manager. Despite gradually emerging indications of an improving market environment, bears still loom large among investors.

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