Bloomberg News

Japan’s Topix Index Snaps Six-Day Slide on Economic Data

May 17, 2012

Japanese stocks rose, with the Topix Index snapping a six-day drop, as Japan’s economic growth beat estimates and the U.S. Federal Reserve signaled its readiness to provide further stimulus, boosting earnings prospects.

Nissan Motor Co. (7201), a carmaker that gets a third of its revenue in North America, rose 3.3 percent. Toshiba Corp., the maker of Regza brand televisions, rose 5.6 percent after saying it will halt domestic production of sets. Melco Holdings Inc. (6676) jumped 6.8 percent after forecasting a 22 percent rise in profit.

The Nikkei 225 Stock Average (NKY) added 0.9 percent to 8,876.59 at the 3 p.m. close in Tokyo, with trading volume 26 percent higher than the 30-day average. The Topix gained 1.1 percent to 747.16, with 26 out of 33 industry groups advancing.

“The market is taking a breather with data out of the U.S. and Japan after getting too much of negative news one after another,” said Takashi Ito, a strategist equity market at Nomura Securities Co., Japan’s biggest brokerage. “The selloff has come to a halt because we haven’t gotten new bad factors.”

The Nikkei 225 retreated 13 percent from this year’s high on March 27 as China’s economic growth slowed and on renewed concern about Europe’s debt crisis. That compares with a 6.2 percent loss in the Standard & Poor’s 500 Index and an 8.4 percent drop in the Stoxx Europe 600 Index over the same period.

The decline has brought the value of stocks on the Topix down to 0.89 times book value, compared with 2.1 for the Standard & Poor’s 500 and 1.34 for the Stoxx Europe 600. A value less than one means investors can buy companies for less than the value of their assets.

Japan Growth

Shares rose after a report showed Japan’s economy grew an annualized 4.1 percent in the first quarter, beating economists’ estimates for a 3.5 percent expansion. Reports showed U.S. housing starts and industrial production exceeded forecasts in April. Federal Reserve policy makers said they stand ready to deploy more stimulus measures should the economy lose momentum, according to minutes of their policy meeting last month.

Nissan added 3.3 percent to 777 yen. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, gained 3.9 percent to 1,161 yen.

Shares also rose as the 25-day Toraku index, which compares the number of stocks that have advanced with the number that have declined on the Tokyo Stock Exchange, fell to 65 yesterday. A reading less than 70 indicates to some investors a gain is likely.

“You don’t want to sell much more because shares have been oversold and I think they are likely to rebound,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $70 billion. “The debt crisis will affect Japan, but its impact will be rather small compared with the U.S. and Europe.”

Greek Gridlock

Futures on the S&P 500 (SPX) rose 0.5 percent today. The gauge slipped 0.4 percent in New York yesterday after the European Central Bank said it will stop lending to Greek banks temporarily as President Mario Draghi signaled it won’t bend key principles to keep Greece in the monetary union. The political gridlock after an inconclusive election last week reignited fears Greece will renege on austerity pledges required for 240 billion euros ($306 billion) in aid and exit the euro.

Among other stocks that rose, Toshiba advanced 5.6 percent to 322 yen after saying it will end making televisions in Japan after posting a loss amid falling prices and a stronger yen.

Melco Holdings jumped 6.8 percent to 1,834 yen after saying it expects a 22 percent rise in profit to 5.4 billion yen ($67 million) in the year ending March 31 on growing sales. The company aims to expand in developing nations such as Brazil, it said in a statement.

Of the 1,521 companies on the Topix that have posted quarterly results since April 2, 287 exceeded expectations, while 214 missed analysts’ estimates, according to data compiled by Bloomberg News.

The Nikkei 225 Volatility Index (VNKY) fell 7.6 percent to 22.79, indicating traders expect a swing of 6.5 percent on the benchmark gauge over the next 30 days.

To contact the reporters 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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