Lehman Brothers has upgraded its recommendation on Japanese banking stocks, saying investors should overweight the sector as the government's bank rescue package kicks in.
The investment bank's call comes just days after influential Morgan Stanley Dean Witter global strategist Barton Biggs increased his holdings of Tokyo-listed equities, sparking a sharp jump in share prices.
Lehman analysts Robert Zielinski and Nozomu Kunishige said the 60 trillion yen (about HK$3.96 trillion) rescue package - equivalent to twice the market capitalisation of all listed Japanese banks - was 'simply too big to ignore'.
'If the government delivers the cash and continues its reform drive, we can see Japanese bank stocks embarking on three upward moves,' they said.
The Nikkei-225 Index has fallen 7.45 per cent since the start of the year. It closed 1.52 per cent down yesterday at 14,121.97 points.
Although the exact progress of financial sector reform was hard to gauge and would remain unclear for months, Lehman said banks stocks were already rising and could continue to climb.
