February 20, 2019 / 7:05 AM / 3 months ago

Nikkei rises as U.S.-China trade deal hopes boost sentiment

* Market shrugs off Japan’s weak January exports

* Shares of Honda rise after news of plant closures

By Ayai Tomisawa

TOKYO, Feb 20 (Reuters) - Japan’s Nikkei closed at another nine-week high on Wednesday, as hopes for U.S.-China trade talks helped lift cyclical stocks such as autos and index-heavyweights including SoftBank Group.

The gain came despite Japan’s exports suffering their biggest drop in more than two years in January, as China shipments tumbled and orders for machinery goods fell sharply.

The Nikkei share average ended 0.6 percent higher at 21,431.49, the highest closing since Dec. 17.

A new round of talks between the United States and China aiming to resolve their trade war began in Washington on Tuesday, with sessions at a higher level later in the week.

The Japanese market largely shrugged off the weak trade data, which showed that exports fell 8.4 percent from a year earlier, focusing instead on improved prospects of a U.S.-China trade deal that could boost equity markets.

“There are concerns about Japan’s falling exports, but to investors who haven’t caught up with the recent rally in Japanese stocks, there is a risk that they will fall behind the market’s further rise if the trade talks go well,” said Hiroyuki Ueno, a senior strategist at Sumitomo Mitsui Trust Asset Management.

Toyota Motor rose 1.4 percent and Mazda Motor added 0.9 percent.

Among index heavyweights attracting buyers, SoftBank surged 3.6 percent and Daikin Industries <6367.T. climbed 2.2 percent.

Honda Motor Co, which at one point had gained 2.4 percent to a two-week high, ended 0.6 percent higher expectations that the closure of some plants would help reduce its fixed and production costs.

On Tuesday, Honda said it would close its British car plant as well as one in Turkey.

The automaker said in October 2017 it would stop making vehicles at its Sayama plant in Japan by 2022 as it grapples with a shrinking domestic market.

Nomura Securities raised its rating to ‘buy’ from ‘neutral and hiked Honda’s target price to 3,850 yen from 3,400 yen, saying closure of its Sayama plant and two in Europe should eliminate excess capacity.

The closures should “boost operating profits by 60 billion yen a year from the fiscal year ending March 2022 onwards,” analysts wrote.

Fujitsu Ltd dropped 3.3 percent after it said it will incur 46.1 billion yen in expenses this fiscal year for a programme to help some employees get work outside the company.

The broader Topix gained 0.4 percent to 1,613.47. (Editing by Richard Borsuk)

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