* Nikkei gains 1.3 percent
* Blue-chip exporters chased by bargain hunters
* Nikkei up 3.6 pct in December, still down 1.9 pct in 2010
* Volume low as foreigners absent
By Antoni Slodkowski and Ayai Tomisawa
TOKYO, Dec 21 (Reuters) - Japan's Nikkei average rose 1.3
percent on Tuesday, clawing back towards a seven-month high hit
last week as investors rushed to buy on dips after the previous
day's losses that followed a fall in Shanghai equities.
Bargain hunters disregarded a slightly stronger yen against
the dollar and aggressively added blue-chip exporters, encouraged
by rebound in Chinese markets that lost the day before amid
expectations that access to funds may become harder as banks curb
lending towards the year-end.
Adding to positive sentiment was a calming of the situation
on the Korean peninsula, where the North Korea stepped back from
confrontation over military drills by the South on Monday and
reportedly made a new offer on nuclear inspections.
[]
"Investors are buying on dips, pushing the Nikkei higher
after yesterday's losses," said Takashi Ohba, a senior strategist
at Okasan Securities.
Major electronics maker Sony Corp <6758.T> gained 2.6
percent, construction machinery maker Komatsu Ltd <6301.T>
climbed 1.6 percent and Mitsubishi Motors Corp <7211.T> added 2.2
percent.
"The Nikkei was flat last week and traders waited for any
positive factors to trade on -- they got a good opportunity today
so the market is posting solid gains," said Ohba.
He said traders' next target looms at around 10,420.74, where
futures and options contracts expiring in December settled
earlier in December.
"If that resistance is pierced, even on low volume, the
Nikkei will be on track to end the year above 10,500," he said.
By mid-afternoon the benchmark Nikkei <> gained 1.3
percent or 131.28 points to 10,348.05, while the broader Topix
<> rose 0.9 percent to 906.47.
VOLUME SAGS AHEAD OF CHRISTMAS
Lower volume added to market volatility as foreign investors,
who have been net buyers of Japanese equities for the last six
weeks to help the Nikkei rally some 13 percent since the
beginning of November, were less active due to Christmas
holidays.
By the midday break only 656 million shares had changed hands
on the Tokyo Stock Exchange's first section, putting it on course
to end the session well below last week's daily average of around
2.1 billion shares.
But analysts said the Nikkei may be re-energised next week
when foreign investors return from holiday.
"We may see some window-dressing buying at the end of the
month, which is something of a trend every year," said Fujio
Ando, senior managing director at Chibagin Asset Management.
"They may buy large cyclical stocks at the year-end and the
Nikkei may rise further," Ando said.
Sentiment was further boosted after the Bank of Japan kept
monetary policy on hold and said it will steadily purchase
various assets and provide longer-term funds through its 35
trillion yen ($418 billion) asset buying and market operation
fund, to ensure that the effects of its monetary easing steps
spread across the economy. []
Shares of Shinsei Bank <8303.T> surged 7.8 percent in heavy
trade after the bank said on Monday it had reorganised its
consumer finance division to strengthen its retail banking
operations.
(Editing by Michael Watson)
