Tokyo stocks rebound on Citigroup investment news

TOKYO (Reuters) - Japanese stocks turned positive on Tuesday, erasing earlier losses of more than 2 percent on news that Citigroup has reached a deal to sell a $7.5 billion stake in itself to the Abu Dhabi Investment Authority (ADIA).

The news sent the dollar surging to above 108 yen, with stocks also reversing course and heading higher.

Bank shares, which had led the market downward during the morning session, surged on the news, with Mizuho Financial Group up 3 percent.

At 0348 GMT the benchmark Nikkei average was up nearly 1 percent at 15,282.22, a gain of 146.02 points, and the broader TOPIX index rose 0.74 percent to 1,477.77, up 10.74 points.

"The news gave a sense of relief to investors and they thought it was time to go bottom fishing," said Tsuyoshi Nomaguchi, a strategist on Japanese equity research at Daiwa Securities Co Ltd.

"In times like these, investors who have benefited from high oil prices are the only ones who can take risks ... This could mean we are nearing the beginning of the end of the subprime saga."

The sale is seen providing a shot of funds to the biggest U.S. bank, which has been one of the hardest hit by subprime mortgage defaults and a resultant credit crunch.