Bloomberg News

Japanese Stocks Advance on China Stimulus Optimism

May 29, 2012

Japanese stocks rose, sending the Nikkei 225 (NKY) Stock Average to a four-day advance, as China introduced measures to stimulate consumer demand and on speculation that shares were oversold.

Komatsu Ltd. (6301), a construction machinery maker that gets 14 percent of sales from China, rose 3.2 percent. Nippon Yusen K.K., Japan’s largest shipping line by sales, jumped 4.4 percent after its equity rating was raised to “outperform” by Credit Suisse Group AG. Panasonic Corp. (6752) climbed 3.9 percent after the electronics maker said it’s considering restructuring, including cutting jobs.

“China’s stimulus steps are moving closer to market expectations,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “Shares that were oversold are now being bought as China’s economic measures are coming into view.”

The Nikkei 225 rose 0.7 percent to 8,657.08 at the 3 p.m. close in Tokyo, with volume about the same as the 30-day average. The broader Topix Index added 0.8 percent to 727.03, reversing losses of as much as 0.8 percent.

Stocks linked to China gained after the cabinet agreed to revive financial incentives for consumers to trade in used passenger cars for cash to raise demand in the world’s biggest vehicle market, a government official said. China’s finance ministry said separately it will allocate as much as 2 billion yuan ($317 million) every year to support purchases of energy- efficient cars.

Komatsu gained 3.2 percent to 1,952 yen. Fanuc Corp. (6954), a producer of robotics for Chinese factories, climbed 1.8 percent to 13,880 yen.

Shipping lines gained the most among the Topix’s 33 industry groups after Credit Suisse boosted the sector rating to “overweight” from “market weight,” saying it was “time to sow seeds” for investment returns in a year. The investment bank also raised ratings on the nation’s three biggest companies in the sector to “outperform” from “neutral.”

Nippon Yusen K.K. jumped 4.4 percent to 212 yen. Mitsui O.S.K. Lines Ltd. climbed 4.8 percent to 282 yen. Kawasaki Kisen Kaisha Ltd. soared 5.8 percent to 147 yen.

Panasonic climbed 3.9 percent to 536 yen. The biggest employer among companies on the Tokyo bourse may cut jobs after streamlining operations at production units, spokesman Yuko Hosaka said today. Panasonic’s headquarters staff of about 7,000 will be cut by 3,000 to 4,000 through attrition and transfers to subsidiaries, according to a Nikkei newspaper report.

The 25-day Toraku index, which compares advancing and declining shares on the Tokyo Stock Exchange’s first section, fell to 62.67 yesterday, the lowest since November 2009. A reading below 70 suggests stocks are close to bottoming.

‘Shares Undervalued’

The value of stocks listed on the Topix has fallen to 0.9 times book value, compared with 2.1 times for the Standard & Poor’s 500 Index (SPXL1) 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.

“Shares are undervalued,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co., a unit of Sumitomo Mitsui Financial Group Inc. “They are at a level that indicates they’re oversold in the short term, which will support investors’ sentiment.”

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. The political gridlock in Greece after an inconclusive election this month reignited concern the nation will renege on austerity pledges required for 240 billion euros ($300 billion) in aid and exit the euro.

Stocks fell earlier in the day as Spain tries to shore up its banks and help cash-strapped regions while borrowing costs surge. As the nation’s narrowing market access depends on domestic lenders backed by the European Central Bank, Spanish Prime Minister Rajoy is considering using public-debt securities rather than cash to fund the 19 billion-euro ($24 billion) bailout of BFA-Bankia.

‘Spain’s Band-Aid’

“Spain’s public injections into banks are only putting a band-aid on the crisis,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd., which oversees about $75 billion. “It’s preventing the problem from getting worse faster, but it can’t stop the situation from gradually deteriorating.”

Konica Minolta Holdings Inc. (4902), a photo film maker that counts Europe as its biggest market, slid 0.3 percent to 582 yen, paring earlier losses of as much as 2.6 percent. Kyocera Corp. (6971), an electronics maker that gets almost 20 percent of its sales in Europe, added 0.3 percent to 6,590 yen, reversing the drop of up to 1.8 percent.

Futures on the Standard & Poor’s 500 Index rose 0.9 percent today. The gauge slid 0.2 percent in New York on May 25, paring its first weekly rally since April. Financial markets in the U.S. were closed yesterday for the Memorial Day holiday.

-- With assistance from Satoshi Kawano in Tokyo and Adam Haigh in Sydney. Editor: Jim Powell

To contact the reporter on this story: Norie Kuboyama in Tokyo at

To contact the editor responsible for this story: Nick Gentle at

The Good Business Issue
blog comments powered by Disqus