* Nikkei hits highest level since October 2018
* Valuations getting stretched, Topix at 14 times earnings
* Constructors gain after Maeda takeover bids
* Toshiba machine jumps on bids by activist-backed fund
By Hideyuki Sano
TOKYO, Jan 20 (Reuters) - Japanese shares edged higher to
15-month highs on Monday on strong U.S. housing data and
investor optimism after last week's U.S.-China trade deal, with
take-over bids boosting some in the construction and machine
sector.
The Nikkei share average .N225 rose 0.18% to 24,083.51,
its highest close since October 2018. The broader Topix .TOPX
gained 0.50% to 1,744.16.
The gains came on the back of Wall Street's record close on
Friday after data showed U.S. homebuilding surged to a 13-year
high in December. The market was also underpinned by the signing of an interim
trade deal last week between the world's two largest economies.
"Considering that last year people were talking about the
possibility of trade talks breaking down, it is a huge relief
that we have had a deal," said Masahiro Ayukai, senior
investment strategist at Mitsubishi UFJ Morgan Stanley
Securities.
Still, given that the market has risen almost 20% since
early August, even as corporate Japan's profits outlook has
hardly improved, many investors are turning cautious.
The Topix is now trading more than 14 times above expected
earnings, compared with below 11 times at the start of last
year.
Trade was slow, with the turnover at the Tokyo Stock
Exchange's main board falling to about two-thirds of the average
over the past year and the lowest level so far this year.
Maeda Road Construction 1883.T jumped 19.1% after its
parent and mid-tier constructor Maeda Corp 1824.T launched a
take-over bid for the road builder, which is resisting the move
by its parent firm. Maeda Corp also rose 6% while speculation of more
consolidation in the crowded construction industry boosted other
firms in the sector.
The Tokyo Stock Exchange's construction company index
.ICNS.T rose 1.3% to become the top performer. Nippo 1881.T ,
which has strength in paving work, rose 8.5%.
In another fight over corporate control, Toshiba Machine Co
6104.T soared 18.9% as a fund backed by veteran activist
investor Yoshiaki Murakami planned a takeover bid for the former
subsidiary firm of industrial conglomerate Toshiba Corp
6501.T . Toshiba Corp now owns just over 2% of Toshiba Machine
shares.
Shares of Toshiba Corp fell 3.6% after the company found
possible accounting irregularities at a wholly owned subsidiary,
prompting it to revise past financial statements. Chip-related shares were riding high, with optimism on the
industry getting another boost last week following upbeat
earnings from Taiwan Semiconductor Manufacturing Co Ltd (TSMC).
Taiyo Yuden 6976.T added 3.2% while Disco 6146.T rose
2.8%, and Nidec 6594.T added 2.8%.