TOKYO (Thomson Financial) - Japanese shares rallied into positive territory in early afternoon trade after losing more than 2 percent in the morning session, with trading focus switching to an announcement by Citigroup Inc that it will sell some equity units to the Abu Dhabi Investment Authority for 7.5 billion US dollars.
At 12.47 pm (0347 GMT), the Nikkei 225 index was up 137.87 points, or 0.9 percent at 14,273.08, off a low of 14,801.87 touched earlier in the day.
The Topix index of all first-section shares was up 8.55 points, or 0.6 percent at 1,475.58.
Citigroup said late Monday that it has reached an agreement to sell equity units with mandatory conversion into common shares to the Abu Dhabi Investment Authority.
'That news about Citigroup, one of the worst hit by the subprime loan mess, helped soothe the market's wariness to some extent, immediately sending the dollar back to above the 108 yen,' NTT Smart Trade director Takashi Kudo said.
The announcement also supported US stock-futures contracts on the 24-hour traded Globex, raising expectations that Wall Street may get off to a firm start when trading resumes Tuesday.
'This investment from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business,' Citigroup's acting Chief Executive Win Bischoff said in a statement.
The Abu Dhabi Investment Authority has agreed not to own more than a 4.9 percent stake in Citi and will have no special rights of ownership or control, and will have no role in the management or governance of Citi, including no right to designate a member of the company's board of directors.
The Abu Dhabi Investment Authority will receive units that will be convertible into Citi shares at a price of up to 37.24 dollars a share between March 15, 2010, and September 15, 2011.
The investment deal is expected to close within the next several days.
Banks turned broadly higher in the wake of the announcement, with Mizuho Financial Group rising 19,000 yen or 3.4 percent to 570,000 yen and Mitsubishi UFJ Financial up 29 yen or 2.9 percent at 962 yen.
Exporters also reacted to the reversal of the appreciation of the yen, with Toyota Motor Corp gaining 90 yen or 1.5 percent to 6,080 and Nintendo Co Ltd up 100 yen or 0.2 percent at 62,600.
(1 US dollar=108.61 yen)
Yasuhiko.Seki@thomson.com
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