Bloomberg News

Topix Extends Six-Month High as Paper Makers Surge on Earnings

February 09, 2012

Feb. 9 (Bloomberg) --?Most Japanese stocks rose, with the Topix Index extending a six-month high, as improved earnings at Nippon Paper Group Inc. lifted the paper industry and on investors’ optimism Greece would secure a bailout.

Nippon Paper jumped 5.5 percent. Nippon Sheet Glass Co., which gets 39 percent of its revenue in Europe, added 4.7 percent. Komatsu Ltd., a construction machinery maker that counts China as its biggest market, slid 0.7 percent after mainland inflation unexpectedly accelerated last month, damping prospects for further monetary easing.

The Topix Index rose 0.3 percent to 784.49 as of the 3 p.m. close of trading in Tokyo, its highest since Aug. 5. The gauge earlier fell as much as 0.6 percent. The Nikkei 225 Stock Average fell 0.2 percent to 9,002.24 after falling as much as 0.8 percent.

“History tells us that a deal in Greece will be reached at the last minute,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “A lot of indications show they are heading in that direction even though there are endless delays.”

Paper Makers Surge

Nippon Paper jumped 5.5 percent to 1,766 yen after posting a nearly 40 percent rise in operating profit for last quarter. Mitsubishi Paper Mills Ltd. surged 11 percent to 84 yen and Hokuetsu Kishu Paper Co. gained 4.1 percent to 539 yen. Mitsubishi Paper Mills had the biggest gain on the Nikkei and paper Makers led advances among the Topix’s 33 industry groups.

“Nippon Paper’s earnings triggered gains across the sector,” said Yoshihiko Tabei, senior analyst at Kazaka Securities Co. “The shares were ready to move because the sector has lagged behind other stocks and many of these companies look undervalued.”

Shares on the paper measure trade at an average of 0.72 times book value, compared with 0.95 times for the Topix. A number less than one means that companies can be bought for less than value of their assets.

The Topix has risen 7.7 percent this year even as companies including Toyota Motor Corp. have missed earnings estimates. Of 1,189 companies in the index that have reported since Jan. 9, 229 missed analysts’ estimates while 114 beat them, according to data compiled by Bloomberg.

Futures on the Standard & Poor’s 500 Index were little changed today. The gauge closed 0.2 percent higher yesterday and has risen 7.3 percent this year amid better-than-expected economic data and corporate earnings.

‘Game of Chicken’

Greek Finance Minister Evangelos Venizelos said there are still doubts on the agreement needed to secure a 130 billion- euro ($172 billion) rescue package for his country ahead of a meeting of euro-area finance ministers today.

“The Greek situation hasn’t progressed,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $37 billion. “This is like a game of chicken, and they won’t make much progress until they get close to the deadline.”

Nippon Sheet Glass rose 4.7 percent to 133 yen. Shimano Inc., a bicycle-equipment maker that gets about 38 percent of revenue in Europe, rose 8.2 percent to 4,270 yen in Osaka.

Chinese Inflation

Some Japanese stocks earlier fell after China’s consumer prices unexpectedly rose 4.5 percent in January as the weeklong Lunar New Year holiday drove spending, the National Bureau of Statistics said today. Economists surveyed by Bloomberg had been expecting inflation to slow to 4 percent.

Komatsu lost 0.7 percent to 2,174 yen, while Hitachi Construction Machinery Co., which gets 27 percent of its sales in China, slid 1.4 percent 1,507 yen. Machinery makers also declined after orders in Japan fell 7.1 percent, the fastest pace in three months, in December. Analysts had expected a 5 percent decline.

The Nikkei 225 Volatility Index dropped 0.5 percent to 20.91, indicating traders expect a swing of about 6 percent on the benchmark gauge over the next 30 days.

--Editors: Jim Powell, Jason Clenfield.

To contact the reporter on this story: 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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