Nikkei climbs to 2-mth high as financials surge

                                
   (Adds stocks, details)
                                
 By Elaine Lies
                                
 TOKYO, April 28 (Reuters) - Japan's Nikkei stock average rose
0.75 percent to a two-month high on Monday, with Mitsubishi UFJ
Financial Group <8306.T> and other banks surging on growing
confidence that the worst of the credit crunch may well be over.
Japanese government bond (JGB) futures extended losses and
investors began to shift those funds back into stocks, market
players said, while exporters such as Honda Motor Co Ltd <7267.T>
rose as the dollar advanced.
                                
 Panasonic maker Matsushita Electric Industrial Co <6752.T>
and Sanyo Electric Co <6764.T> may tie up in the first
reorganisation move among Japan's top electronics makers, the
Yomiuri newspaper reported on Monday, but the two companies
quickly rejected the report. [ID:nT338322]
                                
 Trading was briefly halted in both shares, but by midday
Sanyo's shares had leaped and Matsushita's had risen.
                                
 But the biggest gainers by far were financials, with top
lender Mitsubishi UFJ Financial Group and other banks hitting
levels not seen since December, surging more than 9 percent in
some cases.
"I think there's general agreement that the worst of the
credit crisis due to the subprime issue is behind us, that this
was last (financial) year's news, and that the market's
definitely hit the bottom," said Koichi Ogawa, chief portfolio
manager at Daiwa SB Investments.
                                
 "A lot of investors were probably underweight on banks, so
there's high demand, with much short-covering today."
Stocks were also benefiting from the continued weakness of
JGB futures, which on Friday plunged to their greatest one-day
loss in five years.
                                
 "A lot of the worries about risk in the financial system have
started to clear up, and as a result money that went into
Japanese government bonds is now returning to stocks, especially
financials," said Noritsugu Hirawaka, a strategist at Okasan
Securities.
                                
 But he and Ogawa warned that problems linger, with gains
likely to be limited ahead of economic indicators and a slew of
Japanese earnings yet to come as results season moves into high
gear.
                                
 Among companies due to announce results later on Monday are
Hoya Corp <7741.T> and Mitsubishi Heavy Industries <7011.T>.
                                
 The benchmark Nikkei <.N225> gained over 100 points to
13,968.10 after earlier rising above 14,000 for the first time
since Feb. 27, on track for its highest close in two months.
                                
 The broader TOPIX <.TOPX> was up 1.9 percent at 1,365.43.
                                
 BANKS BOOMING
                                
 Banks climbed, with Mitsubishi UFJ surging 8.9 percent to
1,133 yen, its highest since December. Sumitomo Mitsui Financial
Group <8316.T>, Japan's No.3 bank, gained 9.1 percent to 896,000
yen, also its greatest gain since December, while Mizuho
Financial Group <8411.T>, was up 8.3 percent at 523,000 yen.
                                
 The banking subindex <.IBNKS.T> was the biggest gainer among
the subindices, rising 7 percent. It was followed by securities
<.ISECU.T>, which rose 6.2 percent.
                                
 Nomura Holdings Inc <8604.T>, Japan's largest brokerage,
gained 6.3 percent despite posting on Friday a surprise quarterly
loss of $1.5 billion on its exposure to bond insurers and warning
that it could still be at risk for further credit crisis-related
losses. [ID:nT358523]
                                
 Market players said the rise was due in part to a sense that
all the bad news was out, as well as strong demand for
financials, but warned that the bounce may be temporary.
                                
 "The rise in banks has been so fast that it's extremely
likely there could be some selling lying in wait, so whether this
trend will continue is unclear," added Daiwa SB's Ogawa.
The dollar surged against the yen to a two-month high <JPY=>,
and this boosted Japanese exporters. A strong yen makes Japanese
goods less competitive overseas and cuts into profits earned
abroad when repatriated to Japan.
                                
 Honda Motor Co Ltd climbed 4.2 percent to 3,470 yen and
industrial robot maker Fanuc Ltd <6954.T> rose 2.5 percent to
10,820 yen.
                                
 Matsushita rose 1.2 percent to 2,145 yen and Sanyo jumped 4.2
percent to 248 yen.
                                
 Trade picked up on the Tokyo exchange's first section, with
909 million shares changing hands, compared with last week's
morning average of 790 million. Advancing stocks beat decliners
by nearly 3 to 1.
 (Editing by Brent Kininmont)