Bloomberg News

Most Japanese Stocks Drop as Bond Yields Rise After S&P Comment

November 27, 2011

Nov. 25 (Bloomberg) -- Most Japanese stocks fell as the nation’s benchmark bond yields rose above 1 percent on concern the government will be unable to rein in the world’s largest debt burden.

Mizuho Financial Group Inc., Japan’s third-biggest lender, dropped 1 percent after Standard & Poor’s said yesterday it may be close to lowering the nation’s sovereign grade. Sharp Corp., the liquid-crystal display maker that gets about 12 percent of sales in Europe, sank 3.9 percent after German Chancellor Angela Merkel said she remains opposed to common euro-area debt sales. Elpida Memory Inc. jumped 7.9 percent after SMBC Nikko Securities Inc. upgraded the memory-chip maker’s stock rating.

“The market is becoming sensitive to movements of bond prices and yields after observation Japan is coming closer to a credit downgrade amid focus on Europe’s debt crisis,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co.

The Nikkei 225 Stock Average lost 0.1 percent to 8,160.01 as of the 3 p.m. close in Tokyo, paring losses of as much as 0.4 percent. The gauge decreased 2.6 percent this week, its fourth straight weekly decline, amid signs Europe’s debt crisis is spreading to major economies.

The Topix Index added 0.1 percent to 706.60, reversing losses of as much as 0.3 percent earlier today after closing yesterday at its lowest level since March 12, 2009. About nine shares fell for every five that rose in the gauge, which is just 1.5 percent away from levels not seen since 1983.

Quadrillion-Yen Debt

Some Japanese lenders declined amid concern rising bond yields would make it difficult for Prime Minister Yoshihiko Noda’s administration to tackle the nation’s public debt burden, which the government projects will exceed 1 quadrillion yen ($13 trillion) in the year through March. The International Monetary Fund said this week there’s a risk a “sudden spike” in yields could make the nation’s borrowings unsustainable.

Mizuho dropped 1 percent to 98 yen. Shinsei Bank Ltd., the lender partly owned by J. Christopher Flowers, sank 5.2 percent to 73 yen.

Exporters to Europe declined after Merkel rejected an expanded role for the European Central Bank in fighting the crisis and said common euro bonds are “not needed and not appropriate.”

Sharp dropped 3.9 percent to 741 yen. Mitsubishi Electric Corp., a maker of home appliances and industrial equipment that gets about 8 percent of sales from Europe, slipped 1.2 percent to 669 yen.

‘Relatively Cheap’

“Japanese stocks are relatively cheap, and that’s giving some support to the market,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $120 billion. “If Europe shows concrete actions rather than just talk, there’s a good chance the market’s overly pessimistic view of the region will be corrected. There is a broad sense of pessimism in the region as a whole.”

The Nikkei 225 has fallen 20 percent this year on concern Europe’s worsening debt crisis will hamper the global recovery. Shares on the benchmark index are trading at 1 times the value of estimated net assets, compared with 1.8 times for the Standard & Poor’s 500 Index and 1.2 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg News.

Chip Stocks

Among stocks that advanced, Elpida Memory jumped 7.9 percent to 383 yen after SMBC Nikko Securities boosted its rating to “outperform” from “neutral,” saying the chip maker’s earnings may improve.

Suppliers of chip-making equipment also gained after the Nikkei newspaper reported orders will likely rise 30 percent this quarter for Japanese companies that produce machinery for manufacturing chips and liquid-crystal.

Advantest Corp., the world’s biggest maker of memory-chip testers, gained 3 percent to 800 yen. Ulvac Inc., a producer of vacuum devices for semiconductors, rose 5 percent to 905 yen. Tokyo Electron Ltd., the world’s second-largest maker of semiconductor equipment, added 1.7 percent to 3,925 yen.

Olympus Corp., the scandal-hit maker of cameras and endoscopes, climbed 8.6 percent to 1,107 yen, extending gains for a fourth day. Former President Michael C. Woodford pledged to work with the Japanese camera maker’s board to try and avoid delisting after three executives implicated in a scheme to hide losses resigned.

--With assistance from Yoshiaki Nohara in Tokyo and Kana Nishizawa in Hong Kong. Editors: Nick Gentle, John McCluskey, Jim Powell.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net.

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


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