Feb. 17 (Bloomberg) -- Mitsui & Co. may be the worst hit of Japanese trading houses as commodity prices slow, while rival Mitsubishi Corp. has the most to gain, according to JPMorgan Chase & Co.
Mitsui’s “earnings from non-resource operations look vulnerable,” JPMorgan’s Tokyo-based analyst Akira Kishimoto said in a report dated Feb. 15. Mitsubishi’s ability to get “stable” earnings outside of commodities make it the bank’s top pick of Japan’s five main traders, he said.
Trading houses’ units outside of raw materials will become more important as commodity prices slow, Kishimoto said. Mitsubishi, Sumitomo Corp. and Itochu Corp. have shown the best results for non-resource earnings during global market volatility, he said.
An improvement in coking coal prices after March will boost earnings at Mitsubishi, which via an alliance with BHP Billiton Ltd. is the world’s biggest exporter of the fuel, Kishimoto said. Marubeni Corp. is JPMorgan’s second pick based on the start of mining at a Chile copper asset part-owned by the company and “persistently high oil prices,” Kishimoto said.
Mitsubishi is Japan’s biggest trading house by market value, followed by Mitsui. Sumitomo, the No. 3, was the closest of the group to meeting its annual profit target after the nine- month results were published earlier this month. JPMorgan ranks it the least preferred of the five companies.
--With assistance from Ichiro Suzuki in Tokyo. Editors: Rebecca Keenan, Ryan Woo
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