Bloomberg News

Japan Stocks Gain as Europe Strikes Deals on Writedowns, Bailout

October 27, 2011

Oct. 27 (Bloomberg) -- Japanese stocks gained, sending the Nikkei 225 Stock Average to its highest close in two months, after European leaders made a breakthrough in resolving the debt crisis that has roiled markets this year.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by market value, climbed 5.7 percent after French President Nicolas Sarkozy said Europe agreed to write down Greek debt and expand the reach of a regional rescue fund. Mazda Motor Corp., an automaker that depends on Europe for almost a fifth of its sales, advanced 3.8 percent. Olympus Corp. surged 23 percent after its chairman resigned amid a scandal that wiped out about half the company’s market value.

The Nikkei 225 gained 2 percent to 8,926.54, its highest close since Sept. 2. The broader Topix index increased 2.2 percent to 762.79. Stocks rebounded from earlier losses after negations that stretched early into the morning in Brussels yielded results.

“It is a breakthrough,” Patrick Bennett, a Hong Kong- based strategist at Canadian Imperial Bank of Commerce, said in a Bloomberg Television interview. “We’ve got an apparent agreement on a haircut of Greek debt, a recapitalization of banks, and some leverage of the fund so it was the best that we could have got.”

Futures on the Standard & Poor’s 500 Index rose 1.6 percent after French President Nicolas Sarkozy said investors have agreed to a voluntary writedown of 50 percent on Greek debt. The euro region’s bailout fund will be leveraged by four to five times, he said.

‘A Step Forward’

“There’s a risk-on mood in the market after Greece’s debt problem moved a step forward,” said Tomomi Yamashita, a senior fund manager at Shinkin Asset Management Co. in Tokyo, which oversees $6 billion. “The fact that a specific percentage on the writedown was announced had a big effect.”

Stocks reversed earlier declines that came after yesterday’s summit appeared to have produced no progress on bondholder losses as part of a second Greek bailout or on expanding the reach of the region’s rescue fund.

The Topix has tumbled 15 percent this year amid concern Europe’s debt crisis would derail a global economic recovery. Stocks also fell after the March earthquake and tsunami disrupted Japanese manufacturing. The decline has cut the price of shares on the index to 0.90 times estimated book value at the last close, near the lowest since March 2009.

Banks and exporters advanced today. Mitsubishi UFJ gained 5.7 percent to 350 yen. Sumitomo Mitsui Financial Group, Inc., Japan’s second-largest lender by market value, advanced 5.1 percent to 2,234 yen.

BOJ Buys Bonds

Mazda climbed 3.8 percent to 165 yen. Sony Corp., Japan’s biggest exporter of consumer electronics, rose 5.4 percent to 1,650 yen.

Shares also rose after the Bank of Japan expanded credit and asset-purchase programs to a total of 55 trillion yen ($724 billion) from 50 trillion yen. The central bank kept the overnight lending rate between zero and 0.1 percent.

Olympus surged 23 percent to 1,355 yen after Chairman Tsuyoshi Kikukawa resigned yesterday. The maker of optical equipment has lost about 45 percent of its market value since former Chief Executive Officer Michael C. Woodford revealed the company paid $687 million to advisers on a $2 billion acquisition in 2008.

Woodford yesterday said he will meet with the U.S. Federal Bureau of Investigation and submit documents related to the fees.

Among Japanese stocks that fell, Nippon Electric Glass Co. plunged 7.1 percent to 758 yen, leading declines among glassmakers after U.S. rival Corning Inc. said it would cut prices. Asahi Glass Co., which makes glass for liquid-crystal- displays and cars, dropped 1.4 percent to 711 yen.

Nippon Electric Glass also fell after saying profit dropped by 42 percent in the six months through September.

--Editors: Jason Clenfield, Jim Powell.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

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


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