* Nikkei climbs 1.2 pct to above 9,800 * Heads for its best February performance in two decades * Panasonic climbs after naming new president By Dominic Lau TOKYO, Feb 29 (Reuters) - Japan's Nikkei share average climbed above 9,800 on Wednesday for the first time since last August on the back of Wall Street gains, extending a rally of more than 10 percent this month and heading for its best February performance in two decades. Banks were among the top performers as the markets remained in a so-called "risk-on" mode ahead of another mammoth European Central Bank cash injection to fight the euro zone debt crisis. Mitsuibishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group were up between 1 and 2.2 percent. The Nikkei was up 1.2 percent at 9,835.09, a level not seen since early August, while the broader Topix added 1 percent to 846.75. "With the market behaving at the moment, we are still seeing gaijin (foreign investor) flows coming into Japan," a trader at a foreign brokerage said. "That has been ongoing for the last four weeks. We think it will continue because people underweigh Japan. "We have a lot of Asian-based clients talking about buying Japan. We must be close to hitting the top." The benchmark is up nearly 12 percent this month, on track for its best February performance since 1991, shrugging off negative news from Elpida Memory Inc's bankruptcy filing this week. 'OVERBOUGHT' TERRITORY But technical indicators showed the Nikkei was ripe for a pullback. The index was deep in "overbought" territory, with the 14-day relative strength index at 84, while the slow stochastic, a short-term momentum indicator, also pointed to a retreat. "From a technical view point, the market is overheated. We may see a correction in the very short term," said Hisao Matsuura, equity strategist at Nomura. "Fundamentally, Japan is improving and investors will buy Japanese equities ... which will push the market higher," he said, adding that a weaker yen would also help. Nomura has a Nikkei target of 10,250 for 2012, or upside of 4.2 percent from current level. Overnight, the Dow Jones industrial average closed above 13,000 for the first time since May 2008 and the S&P 500 also hit a milestone, as buoyant U.S. consumer confidence data and a sharp drop in oil prices nudged the nearly five-month rally forward. Global equities have been buoyed by a run of strong U.S.
economic data, the ECB's nearly half a trillion euro liquidity injection late last year and further easing steps by the Bank of Japan and the Bank of England. Investors will focus on Wednesday on the size of the ECB's longer-term refinancing operation gross allotment, as well as net new liquidity. A Reuters poll showed 30 euro money market traders expected the ECB to allot 500 billion euros ($670 billion). Shares of Elpida, Japan's last remaining PC memory chipmaker, were untraded after the open with a glut of sell orders. They were notionally quoted at 98 yen, down more than 61 percent from the previous session . Panasonic Corp, however, climbed 3.6 percent after the electronics company named the head of its loss-making TV business as its new president and pledged to get its TV division back on track within two years.