Bloomberg News

Japan Stocks Swing From Gains, Losses on Euro Concern

May 25, 2012

Most Japanese stocks fell on concern European leaders won’t be able to keep Greece from exiting the monetary union and on speculation shares were undervalued. The Topix (TPX) Index declined for an eighth week, its longest losing streak since November 1977.

Nikon Corp. (7731), a camera maker that gets almost a quarter of its revenue from Europe, lost 1.3 percent. JFE Holdings Inc. sank 3.9 percent after saying its steel unit will withdraw from solar silicon operations. Japan Tobacco Inc. (2914), Asia’s largest cigarette maker by market value, jumped 5.2 percent after agreeing to buy Gryson NV to boost growth in Europe. Mitsui Fudosan Co. paced gains among developers on a report Goldman Sachs Group Inc. will resume real estate investment in Japan.

‘‘We’ve seen expectations turn into disappointments over the past month or so, that’s weighing on Japan’s stocks,” said Koji Toda, chief fund manager at Resona Bank Ltd., which oversees about $188 billion. ‘‘Earning forecasts make you think that they are not only cautious, but also may actually deteriorate. It’s like taking away the ladder from investors who expected a huge rebound in earnings after the earthquake and Thai floods.”

The Topix slid less than 0.1 percent to 722.11 at the 3 p.m. close in Tokyo, falling 0.5 percent on the week as the gauge capped its longest losing streak in 34 years. The Nikkei 225 Stock Average added 0.2 percent to 8,580.39 after swinging between gains and losses more than 15 times.

The Topix has plunged 17 percent from this year’s high on March 27 as China’s economic growth slowed, and on renewed concern about Europe’s debt crisis. Political gridlock in Greece after an inconclusive election this month reignited concern the nation will renege on austerity pledges required for 240 billion euros ($302 billion) in aid and exit the euro.

Pushing Euro Bonds

Futures on the Standard & Poor’s 500 Index (SPXL1) fell 0.2 percent today. The gauge added 0.1 percent in New York yesterday, reversing a loss of 0.6 percent, after Italian President Mario Monti said in a television interview that Italy can help push Germany to support the idea of collective debt in the form of euro bonds to embrace the “common good” of the region.

‘’Markets are concerned that Greece may leave the euro,” said Goya Nakao, senior investment manager at Sompo Japan Asset Management Co. “Investors’ risk aversion will have a double impact on Japanese markets: money may shift to bonds from stocks while the yen strengthens, hurting earnings. That’s why declines in Japanese markets are sharper than overseas.”

Nikon slid 1.3 percent to 2,095 yen. Nippon Sheet Glass Co. (5202), a company that generates almost 40 percent of its sales in Europe, retreated 2.4 percent to 83 yen.

JFE lost 3.9 percent to 1,256 yen after saying on its website that unit JFE Steel Corp. will withdraw from the solar silicon market after prices fell on European demand decline and competition from Asian makers.

Topix Valuations

Valuations on the Topix have fallen to 0.8 times book value, compared with 2.1 times for the S&P 500 and 1.3 times for the Stoxx 600, according to Bloomberg data. A number below one means companies can be bought for less than value of their assets.

The 25-day Toraku index, which compares advancing and declining shares, fell to 70.3 yesterday. A reading below 70 suggests stocks are close to bottoming.

Japan Tobacco gained the most on the Nikkei 225, rising 5.2 percent to 447,500 yen, after the maker of Camel and Mild Seven cigarettes agreed to pay 475 million euros ($596 million) for Belgium-based Gryson to boost growth in Europe’s roll-your-own market.

Developers gained after the Nikkei newspaper reported Goldman Sachs plans to invest in Tokyo office buildings this summer after a four-year absence from Japan’s property market.

Mitsui Fudosan, the nation’s largest developer by revenue, rose 1.8 percent to 1,285 yen. Tokyu Land Corp., which had its equity rating raised to “overweight” by JPMorgan Chase & Co., jumped 3.2 percent to 350 yen.

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

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


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