Bloomberg News

Nikkei 225 Advances Most in 3 Weeks on Easing Greek Debt Concern

June 21, 2011

June 21 (Bloomberg) -- Japanese stocks rose, sending the Nikkei 225 Stock Average to its biggest gain in three weeks, on renewed confidence Greece will be rescued from a default that could destabilize Europe.

Nissan Motor Co., a carmaker that gets 15 percent of its revenue in the region, advanced 3.1 percent. Aeon Co. jumped 3.8 percent after the Nikkei newspaper said profit at Japan’s second-largest retailer by market value increased 30 percent in the three months through May. Kubota Corp., a maker of farm equipment that had delayed earnings forecasts because of damage from March’s earthquake, advanced 2.9 percent after saying profit will increase this year.

“Investors are sure that Europe’s debt problems won’t spill over in a domino effect,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd., which holds about $240 billion in deposits. “There’s more confidence that European Union countries will step in to help Greece.”

Nikkei 225 rose 1.1 percent to 9,459.66 at the 3 p.m. close in Tokyo, the most since May 31. The broader Topix index gained 1.1 percent to 815.73, with all 33 of the gauge’s industry groups advancing.

The Topix has lost 12 percent since March 10, the day before a magnitude-9 earthquake and tsunami devastated Japan’s northeast coast, triggering the worst nuclear accident in 25 years, disrupting supply chains, and leaving more than 23,000 people dead or missing. The decline was the biggest among the world’s 40-largest benchmark indexes.

Confidence Vote

The slump has pushed valuations on the Topix index to 1.18 times book value, compared with 2.15 on the Standard & Poor’s 500 Index and 10.71 on the Stoxx Europe 600 Index. About two thirds of the 1,671 Topix companies trade at less than book value, meaning that investors could theoretically buy the firms at current prices and liquidate them at a profit.

Greek Prime Minister George Papandreou faces a confidence vote today in parliament. European Union leaders have insisted Papandreou secure multi-party support for austerity measures that are a condition of the aid needed to avoid default as soon as next month.

Luxembourg’s Jean-Claude Juncker, head of the euro-region finance ministers group, said yesterday Papandreou assured him the government would do everything necessary to ensure delivery of financial aid from the European Union and International Monetary Fund.

‘Worst-Case Scenario’

“Greece will be supported by European nations in the end,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “We’re going to avoid a worst-case scenario.”

Markets across Asia tumbled last week, with the Topix slipping 1.5 percent, on concern that default by Greece could cause a freeze in credit markets worldwide, similar to the one in 2008 when Lehman Brothers Holdings Inc. collapsed. IMF Managing Director John Lipsky said yesterday there’s still a risk of the crisis “spilling over to the rest of the world.”

Nissan climbed 3.1 percent to 820 yen today. TDK Corp., an electronics manufacturer that gets about 15 percent of its revenue from Europe, gained 3.3 percent to 4,485 yen.

TDK extended gains after maker of electronic parts projected net income will rise 11 percent to 50 billion yen ($624 million) in the year ending in March 2012. The company said it plans to pay an annual dividend of 90 yen this year, higher than the previous year’s payout of 80 yen.

Quake Recovery

The yen depreciated to as low as 115.35 against the euro today, a level not seen since June 15, compared with 114.16 at the close of stock trading in Tokyo yesterday. A weaker yen boosts the value of overseas income at Japanese companies when converted into their home currency.

Aeon advanced 3.8 percent to 931 yen, the biggest gain since March 16. The company may say its March-May operating profit rose 30 percent to about 28 billion yen, the Nikkei newspaper reported, without saying where it got the information. Supermarket sales added to the profit increase, the report said.

Kubota increased 2.9 percent to 681 yen. The company, which had delayed its earnings forecast because of disruptions to factories after the earthquake, said full-year net income will rise 9.4 percent to 60 billion yen from a year earlier on a 7.1 percent increase in sales.

Reconstruction Work

Japan’s government raised its assessment of the economy for the first time in four months as production and exports show signs of recovering from a slowdown caused by the March 11 earthquake and tsunami.

Bank of Japan Governor Masaaki Shirakawa said on June 1 supply constraints are easing faster than expected as companies rush to repair factories. While Gross domestic product shrank at an annualized 3.5 percent rate in the three months ended March 31, economists predict the economy will expand in the second half of the year as reconstruction work kicks in.

Among stocks that fell, Tokyo Electric Power Co., battling the worst nuclear crisis since Chernobyl, lost 2.9 percent to 305 yen, the most on the Nikkei. The company had its credit rating cut four steps to junk status by Moody’s Investors Service as costs related to the Fukushima disaster escalated.

Dainippon Screen Manufacturing Co., a maker of chip equipment, retreated 1.3 percent to 661 yen. JPMorgan Chase & Co. yesterday cut its rating on the company to “neutral” from “overweight,” citing higher costs for employment and research and development.

--With assistance from Toshiro Hasegawa in Tokyo. Editor:

Jason Clenfield.

To contact the reporters on this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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