Bloomberg News

Japan Stocks Gain First Time in 3 Days as Trading Houses Climb

July 13, 2011

July 13 (Bloomberg) -- Trading houses led Japanese stocks higher for the first time in three days after Credit Suisse Group AG initiated coverage of the sector with an “overweight” rating, and China’s economic growth beat estimates, improving the outlook for Japan’s biggest export market.

Mitsubishi Corp. and Mitsui & Co., the country’s top commodity traders, gained after Credit Suisse said shares were cheap. Komatsu Ltd., a maker of construction equipment that counts China as its largest market, gained 0.8 percent. Sony Corp., Japan’s biggest exporter of consumer electronics, reversed earlier declines after the yen eased from its strongest level in four months amid speculation Japan will sell its currency to protect exporters.

The Nikkei 225 Stock Average rose 0.4 percent to 9,963.14 at the 3 p.m. close in Tokyo. The gauge earlier lost as much as 0.4 percent after Moody’s Investors Service yesterday cut Ireland’s investment rating to junk status, adding to concern Europe’s debt crisis will spread. The Topix advanced 0.4 percent.

“You get the sense that stocks aren’t reacting to bad news,” said Masaru Hamasaki, who helps oversee the equivalent of $18 billion as chief strategist at Toyota Asset Management Co. in Tokyo. “A bottom is firming up because Japanese shares are still cheap relative to earnings estimates.”

Quake Rebound

The Topix has lost 24 trillion yen ($300 billion) in market value, or 7.6 percent, since March 10, the day before the earthquake and tsunami that devastated Japan’s northeast. The gauge has risen 5.9 percent in the past month as manufacturers including Toyota Motor Corp. said they are restoring production and amid increasing confidence Greece would avoid a default.

Stocks reversed earlier declines and the yen weakened today after Japanese Finance Minister Yoshihiko Noda said the currency’s moves have been ‘a bit one-sided’ and he is watching markets carefully. The yen weakened 1.4 percent against the dollar after earlier trading at its highest level against the greenback since March 17, a day before Group of Seven nations intervened to halt its advance.

Sony gained 0.6 percent to 2,149 yen, after falling as much as 1.2 percent. Honda Motor Corp., Japan’s second-largest carmaker, increased 0.2 percent to 3,175 yen.

Stocks climbed after a report China’s economy grew 9.5 percent in the second quarter, easing from a 9.7 percent pace in the previous three months. Authorities in the world’s second- largest economy have tried to cool inflation by raising interest rates and capping the amount of money banks can lend. Investors have been concerned the measures would choke the economy’s expansion.

‘Hard-Landing’

“China is managing to cool growth, and that should go a long way towards easing the ‘hard-landing’ fears,” said Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., which manages about $100 billion. “The fact that growth is softening should also allow the authorities to take their foot off the monetary brake.”

Komatsu, which sells about a quarter of its excavators and bulldozers in China, advanced 0.8 percent to 2,480 yen. Fanuc Corp., a maker of factory automation tools that gets about half its sales in Asia, gained 1.3 percent to 14,050 yen.

Trading companies led advances on the Topix after Credit Suisse analyst Yuji Nishiyama started coverage of the sector with an “overweight” rating, citing low valuations. Mitsubishi gained 1.8 percent to 2,069 yen.

Most Undervalued

Mitsui, which Credit Suisse said was the most undervalued of Japan’s major trading houses, rallied 2.1 percent to 1,432 yen. Shares of the company trade at 5.7 times estimated earnings, compared with an average of 15.9 for the Topix index.

“The major trading company stocks are oversold,” Nishiyama said in a report. “Full year-earnings are likely to beat company targets, even if resource prices do not return to an upward trajectory.”

Energy companies rose after crude prices gained yesterday by the most in two weeks. Inpex Corp., the country’s No. 1 oil driller, climbed 2.1 percent to 596,000 yen. Japan Petroleum Exploration Co., the No. 2, gained 1 percent to 3,925 yen.

Crude oil for August delivery climbed 2.4 percent to settle at $97.43 a barrel in New York yesterday, the biggest one-day gain since June 28. The London Metal Exchange Index of prices for six metals including copper and aluminum jumped 1 percent.

Among stocks that fell, semiconductor-related companies declined after Novellus Systems Inc., a U.S. manufacturer of chipmaking tools, forecast profit that missed analyst estimates. Nikon Corp., a maker of lithography equipment, dropped 2.7 percent to 1,810 yen, the most on the Nikkei. Tokyo Electron Ltd., Japan’s biggest maker of semiconductor equipment, lost 1.6 percent to 4,300 yen.

--With assistance from Satoshi Kawano in Tokyo. Editors: Jason Clenfield,

To contact the reporter 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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