Bloomberg News

Japan Stocks Advance as Greek Vote Eases Euro Concerns

June 18, 2012

Japanese Stocks Rise as Greece Vote Eases Euro Breakup Concern

The Nikkei, which has lost 15 percent from this year’s peak on March 27, is trading at 1.1 times book value. This compares with 2.1 times for the S&P 500 and 1.3 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg. Photographer: Tomohiro Ohsumi/Bloomberg

Japan stocks rose, with the Nikkei 225 Stock Average rising to near a month high, as official projections showed parties supporting Greece’s bailout won enough seats to control parliament, easing concern the euro currency bloc would lose one of its 17 members.

Power-tool maker Makita Corp. (6586), which gets the highest proportion of sales in Europe among Topix Index companies, advanced 5.2 percent as the euro strengthened against the yen. Ibiden Co. gained 4.5 percent after the ceramic maker was raised to buy at Bank of America Merrill Lynch. Sharp Corp. soared 5.6 percent on a report Taiwan’s Hon Hai Precision Industry Co. may buy more shares of the Japanese electronics maker.

The Nikkei (MXAP) 225 climbed 1.8 percent to 8,721.02 at the 3 p.m. close in Tokyo, the highest close since May 22, with volume more than 15 percent below the 30-day average. The broader Topix gained 1.7 percent to 738.81, with more than six shares rising for each that fell.

The result of the election was “positive because it helped reduce excessive concern that Greece may separate from the euro currency,” Takashi Aoki, a Tokyo-based fund manager at Mizuho Asset Management Co., which oversees about $34 billion. “Tortuous negotiations on the European debt crisis are expected. I don’t think investors will quickly move to a risk-on mood.”

Volatility declined as stocks advanced. The Nikkei 225 Volatility Index (VNKY) tumbled 17 percent to 23.91 today, the biggest drop since March. The reading indicates traders expect a swing of about 6.9 percent on the gauge over the next 30 days.

Stocks rose after Greece’s pro-bailout New Democracy and Pasok parties took a majority in the 300-member parliament, according to the official projection by the Interior Ministry in Athens. The results eased concern that Alex Tsipras’s Syriza party would take control of the Greek government and reject austerity measures needed to qualify for international aid.

Euro Strengthens

The euro strengthened to as high as 100.85 yen today in Tokyo, compared with 99.62 yen at the close of stock trading on June 15, boosting the value of some overseas income at Japanese companies when repatriated. The euro gained the most against the yen among major currencies.

Makita rose 5.2 percent to 2,894 yen. Nippon Sheet Glass Co. (5202), a glassmaker that generates about 40 percent of its sales in Europe, climbed 6.4 percent to 83 yen.

“Greece’s election is a good result and will provide some short-term relief,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “This will put to rest for a little while the prospect of Greece leaving the euro.”

Futures on the Standard & Poor’s 500 Index advanced 0.4 percent after German Chancellor Angela Merkel’s government signaled willingness to loosen Greece’s austerity requirements so long as the nation abides by its obligations under the bailout program.

G-20 Boost

Leaders from the Group of 20 nations meeting in Mexico will boost the $430 billion firewall the International Monetary Fund announced in April, host President Felipe Calderon. European governments indicated a willingness to adjust the terms of Greece’s bailout package as long as a new government “swiftly” emerges from the closely fought election.

About $5.5 trillion has been erased from stocks around the world since March amid concern growth is slowing in the U.S. and China, the world’s two largest economies, and as Europe’s debt crisis intensified.

Ibiden (4062) climbed 4.5 percent to 1,492 yen after Merrill Lynch raised the investment rating to buy from neutral, citing growing demand of printed-circuit boards for smartphones.

Sharp Advances

Sharp jumped 5.6 percent to 435 yen after Reuters reported Hon Hai Precision Industry is in talks to increase its stake in the electronics company following recent drops in its share price, citing comments by Hon Hai Chairman Terry Gou. Japan’s biggest maker of liquid-crystal displays plans to separate its TV panel business and start selling screens to Foxconn Technology Group, of which Hon Hai is the top shareholder.

Prime Minister Yoshihiko Noda approved the first restart of nuclear reactors shut for safety checks after the Fukushima disaster last year.

The Nikkei, which has lost 15 percent from this year’s peak on March 27, is trading at 1.1 times book value. This compares with 2.1 times for the S&P 500 and 1.3 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg. A number below one means companies can be bought for less than value of their assets.

Among companies that fell, Osaka Organic Chemical Industry Ltd. declined the most on the Topix, plunging 8.9 percent to 390 yen in Tokyo. The maker of organic chemicals cut its full-year profit forecast 39 percent to 487 million yen and lowered its planned annual dividend to 9 yen per share from 12 yen, citing the stronger yen and slumping demand of liquid-crystal panels.

To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.

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


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