Japanese Stocks Rise on Outlook for Economy, Iron-Ore Demand
March 10, 2010, 11:41 PM ESTBy Masaki Kondo
March 11 (Bloomberg) -- Japanese stocks advanced on speculation increased demand will boost earnings at iron-ore producers and that the nation’s economy is recovering.
Mitsui & Co., which owns a 15 percent stake in Vale SA’s major shareholder, climbed 1.9 percent after the Nikkei newspaper reported Brazil-based Vale is seeking to increase iron-ore prices. Mitsui O.S.K. Lines Ltd., Japan’s largest operator of iron-ore ships, rose 0.7 percent. JFE Holdings Inc., the nation’s No. 2 steelmaker, fell 1.4 percent. Shinsei Bank Ltd. slid 2.9 percent as it may abandon a planned merger with Aozora Bank Ltd. and sell shares.
The Nikkei 225 Stock Average climbed 0.3 percent to 10,599.58 as of 1:09 p.m. in Tokyo. The broader Topix index rose 0.4 percent to 925.87, with twice as many shares advancing as falling. The gauges pared gains of as much as 1 percent after a Chinese government report on rising consumer prices spurred concern the country will raise interest rates to curb inflation.
“The economy is undoubtedly in the midst of mild recovery,” said Mitsushige Akino, who oversees the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. “Iron-ore producers don’t think of raising prices unless demand is very strong. That could be further evidence that the global economy is improving.”
The Topix has increased 1.6 percent this week, set for a third-straight weekly gain, as a lower-than-estimated U.S. unemployment rate boosted investor confidence in a U.S. economic recovery. The average daily value of stocks traded in Tokyo dropped 16 percent this week from the 12-month mean as investors awaited the settlement of Nikkei 225 futures and options due tomorrow.
‘Steady Recovery’
Shares in the Topix trade at 1.1 times book value, the lowest level among the world’s 10 biggest markets, according to data compiled by Bloomberg.
The Japanese government will probably upgrade its overall assessment of the nation’s economy for the first time since July, the Nikkei said today, without identifying its source of information. The report is expected to say the economy is making a “steady recovery” as rising exports to China drove growth in production, the newspaper said.
Mitsui, Japan’s No. 2 trading house by market value, gained 1.9 percent to 1,532 yen. Itochu Corp., which holds a stake in a Brazilian iron-ore producer, climbed 1.2 percent to 772 yen. JFE fell 1.4 percent to 3,450 yen. Smaller rival Kobe Steel Ltd. dropped 1.7 percent to 178 yen.
Vale, controlled by Valepar SA, is seeking to raise contract iron-ore prices by more than 90 percent in negotiations with Japanese steelmakers, the Nikkei reported today. Vale, the world’s biggest producer of the raw material used to make steel, has proposed increasing the price for the April-June period, Nikkei said.
‘Immeasurable’ Scale
“Prices for iron ore and resources are largely determined by emerging economies, especially China,” said Naoteru Teraoka, general manager at the investment management division of Tokyo- based Chuo Mitsui Asset Management Co., which oversees about $17 billion. “There will be more demand for infrastructure investment in China and its scale is immeasurable.”
Mitsui O.S.K., Japan’s No. 2 shipping line, advanced 0.7 percent to 613 yen. A gauge of shipping lines pared its 2.5 percent jump to 0.8 percent after China’s government said the nation’s consumer prices rose 2.7 percent year-on-year in February, the highest level in 16 months. Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong, said an inflation rate approaching 3 percent or topping the target may trigger an interest-rate increase.
Shinsei Bank slumped 2.9 percent to 101 yen, the biggest loser in the Nikkei 225. The bank may abandon its merger with Aozora Bank and instead raise 75 billion yen ($830 million) selling shares, said a person with direct knowledge of the matter. Aozora’s stock was unchanged.
--With assistance from Li Yanping in Beijing. Editor: Sam Waite, Alex Devine.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
To contact the editor responsible for this story: Nicolas Johnson at nicojohnson@bloomberg.net.
