Nikkei extends rally, supported by public buying hopes
* Market supported by expectations of public accounts buying * Geopolitical worries, economic uncertainties seen limiting gains * Constructors one bright spot By Hideyuki Sano TOKYO, Aug 14 (Reuters) - Japanese shares rose on Thursday, heartened by gains on Wall Street shares and on anticipation that Japanese public pension funds and other public accounts will step up buying to shore up the market. The Nikkei share average rose 0.6 percent in early trade to 15,301.97 points, extending a three-day rally, though trade volume was low due to Japanese traditional "obon" summer holidays. A rise above its 25-day moving average around 15,325 could be a positive sign, though many market players see limited upside potential given geopolitical concerns and worries about softness in the economy. The gains this week have been largely driven by hopes of more buying from the public sector, such as the $1.2 trillion Government Pension Investment Fund. The fund is expected to announce more allocations to domestic stocks later this year as Prime Minister Shinzo Abe has been urging the fund to review its bond-centric portfolio in order to improve its returns. "For the market to rise further, we need to see upgrade in corporate earnings. And for that to happen, we need to see an improving Japanese business sentiment," said Masayuki Doshida, senior market analyst at Rakuten Securities. Indeed, machinery orders data published earlier joined a long list of disappointing economic data in recent weeks. Orders rose just 8.8 percent in June, way below average forecast of 15.3 percent rise, even after massive falls in preceding two months, adding to the evidence that the impact of tax hike in April was bigger than initially thought. The figure came a day after the government said Japan's economy shrank an annualised 6.8 percent in April-June, showing growth has effectively stalled in the past three quarters. Amid short-term economic uncertainties, investors picked up construction companies, which are seen as a long-term winning bet as Tokyo hosts the Olympic Games in 2020. The construction companies subindex was the best performer on Thursday morning, rising 1.4 percent. Obayashi Corp rose 3.3 percent and Kajima Corp gained 1.4 percent, both hitting seven-year highs while Shimizu Corp rose 1.8 percent to an eight-year high. Bucking the trend, money lender Aiful fell 11.9 percent after it cut its profit outlook. It was the most traded stocks on the main board. The broader Topix rose 0.5 percent while the new JPX-Nikkei Index 400 also rose as much. (Editing by Kim Coghill)
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