Japan’s Nikkei share average rebounded on Tuesday as investors bought stocks on the dips, but uncertainty over Greece and China’s efforts to rescue its slumping stock market capped gains in Tokyo.
The Nikkei share average gained 1.4 percent to 20,399.82 by mid-morning, after tumbling 2.1 percent on the previous day as a Greek vote to reject austerity measures spooked the market.
But after the Japanese market dipped, valuations have become more attractive, with the Nikkei’s price-to-earnings ratio falling below 16, while other developed markets are seen as more expensive. The S&P 500 ‘s PER is around 20.3, according to Thomson Reuters StarMine.
“Retail investors who missed the wave when the market was rising seemed to have found this dip a buying opportunity,” said Takuya Takahashi, a strategist at Daiwa Securities.
He said investors would remain focused on Greece as Athens seeks a new debt deal with its European creditors, and ahead of a July 20 deadline for a Greek repayment to the European Central Bank.
“Although repercussions to the global market is unlikely, we can’t be too optimistic that the Japanese market won’t get sold at all,” he said.
Financials were bought back, with Mitsubishi UFJ Financial Group and Mizuho Financial Group rising 1.1 percent and 1.4 percent, respectively. Insurers were also rising, with Tokio Marine Holdings surging 3.5 percent and Dai-ichi Life Insurance soaring 2.0 percent, respectively.
Exporters were in demand, with Toyota Motor Corp and Panasonic Corp gaining 0.6 percent and 1.5 percent, respectively.
Market participants said that volatility in the Chinese market was in focus as well.
On Monday, Chinese stocks were supported by unprecedented emergency measures from Beijing but trading remained highly volatile. Shares fell on Tuesday, throwing into question the effectiveness of government moves to stabilise the market.
“We need to continue monitoring China shares carefully because to Japan, China could be a real risk if its market falls further,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
He said prolonged weakness in its stock market could lead to a slowdown in consumption among Chinese consumers, and Japanese shares which have high exposures to China may be affected.
The broader Topix gained 1.2 percent to 1,640.00, and the JPX-Nikkei Index 400 advanced 1.2 percent to 14,816.88.