Bloomberg News

Japan’s Nikkei Rises From Four-Month Low on Weaker Yen

May 21, 2012

Japan’s Nikkei 225 Stock Average (NKY) rose from a four-month low as a weaker yen lifted the outlook for exporters and on speculation shares were oversold. Gains were limited after the Group of Eight nations failed to deliver a unified strategy to tame the European debt crisis.

Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, rose 0.7 percent, reversing an earlier loss. Fanuc Corp. (6954), the country’s biggest maker of factory robotics, rose 1.5 percent on a report it plans to boost production. Renesas Electronics (6723) Corp. dropped to a record low after Goldman Sachs Group Inc. cut the chipmaker’s investment rating.

The Nikkei 225 Stock Average (TPX) gained 0.3 percent to 8,633.89 at 3 p.m. in Tokyo, rebounding from its lowest close since Jan. 18. The Topix Index fell less than 0.1 percent to 725.15 after swinging between gains and losses at least 27 times. The measure fell 4.3 percent last week, capping its longest weekly losing streak since September.

“To a degree, the market has priced in the risk of Greece’s exit from the euro,” said Ichiro Yamada, general manager of equities who helps manages about $3.8 billion in stocks at Fukoku Mutual Life Insurance. “The euro’s rebound stands out in the market, and that’s supportive of shares.”

The Nikkei 225 retreated 16 percent from this year’s high on March 27 as China’s economic growth slowed and on renewed concern about Europe’s debt crisis. The political gridlock in Greece after an inconclusive election this month reignited fears the nation will renege on austerity pledges required for 240 billion euros ($307 billion) in aid and exit the euro.

Yen Falls

Shares rose as the yen fell against all of its 16 major counterparts, retreating from a three-month high against the euro. A weaker yen enhances the value of overseas profit at Japanese companies. The 14-day relative strength index for the Nikkei 225 has fallen to 26, below the 30 threshold that some traders say signals a rebound.

Sony added 0.7 percent to 1,108 yen. Mitsubishi Motors Corp. (7211) rose 1.4 percent to 75 yen after the automaker’s 14-day RSI slid to 19.

Futures on the Standard & Poor’s 500 Index (SPXL1) added 0.5 percent today after the index slid 0.7 percent in New York on May 18.

Gains in shares were limited as G-8 leaders over the weekend pushed for Greece to stay in the euro area and supported boosting growth, while Germany said Europe can’t spend its way out of the debt crisis. They concurred at U.S. President Barack Obama’s retreat outside Washington “that the right measures are not the same for each of us.”

German Finance Minister Wolfgang Schaeuble will discuss the future of the 17-nation euro with his newly installed French counterpart, Pierre Moscovici, in Berlin today as European Union leaders prepare for a May 23 summit meeting in Brussels.

’False Starts’

“It’s very important that a clear way forward is established” for the European debt crisis, said Tim Schroeders, a portfolio manager who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Given we had a number of false starts until we reached this juncture, people will await a lot more clarity before reverting to a risk-on stance.”

Among stocks that advanced, Fanuc added 1.5 percent to 13,050 yen after the Nikkei newspaper reported it will expand its production capacity for equipment to control machine tools by 30 percent.

Renesas Electronics slumped 10 percent to 269 yen after its rating was cut to sell/neutral from neutral/neutral by Goldman Sachs, which cited a slow earnings recovery. The stock has plunged 36 percent since May 9, when the chipmaker said it couldn’t provide an earnings outlook due to an uncertain market.

Trading volume on the Nikkei 225 Stock Average was 14 percent below the 30-day average. The Nikkei 225 Volatility Index (VNKY) fell 6.3 percent to 26.75, indicating traders expect a swing of 7.7 percent on the benchmark gauge over the next 30 days.

Stocks on the Nikkei are valued at 1.09 times book value, compared with 2.05 for the Standard & Poor’s 500 and 1.31 for the Stoxx Europe 600. A value of less than one means investors can buy companies for less than the value of their assets.

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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