The Nikkei Rally Continues -- ADR Watch List

The Nikkei 225 has made some nice gains this week, closing higher everyday except Tuesday. December futures contracts are starting to trade further ahead of the daily close again and the yen has been stable in the low 116s.

The N225 gained 198 yen to close at 16,274 (+1.23%). December N225 futures added 210 yen to close at 16,310.

Gains were even stronger for the bank-heavy TOPIX, which faced heavier selling pressure earlier in the month due to concerns over lending margins -- but this has been quelled by speculation the BoJ will raise rates as early as next month and after a report today that lending interest rates increased in October. The TOPIX gained 1.45% to close at 1,603.03, above the psychologically important 1,600 level.

There was some selling early in the afternoon session due to profit taking and uncertainty over tomorrow's CPI release. However, a hedge fund analyst cited yesterday was correct in stating the N225 could end its range bound trading if it exceeded its 25-day moving average of 16,218 (see Bullish on Japan -- Nikkei Primed for Big Rally, scroll down).

ADRs to watch today that had big ordinary share gains and now trade at a discount:

Kubota (KUB) +4.94%, ¥1,019 close ($43.85 ADR equiv. at 116.2/$1), -4.51% ADR discount
ORIX (IX) +3.43%, ¥31,700 ($136.40), -3.74%
Nomura (NMR) +3.84%, ¥2,030 ($17.47), -3.26%
Mitsubishi UFJ (MTU) +2.07%, ¥1.48m ($12.74), -1.94%
Honda (HMC) +2.40%, ¥4,100 ($35.28), -1.74%

ADRs trading at premium based on yesterday's ADR close versus today's ordinary close:

Advantest (ATE) unchanged, ¥6,060 close ($52.15), +0.67% premium
Makita (MKTAY) unchanged, ¥3,340 ($28.74), +0.47%
Sony (SNE) +0.22%, ¥4,580 ($39.41), +0.24%
NTT DoCoMo (DCM) unchanged, ¥177,000 ($15.23), +0.18%

iShares MSCI Japan Index ETF (EWJ) 1-year chart:

Disclosure: The author owns a long position in Nomura and iShares Japan call options.