Bloomberg News

Most Japan Stocks Advance on China Stimulus Speculation

July 13, 2012

July 13 (Bloomberg) -- Most Japanese stocks rose on reports China’s growth slowed, boosting urgency for stimulus to shore up the world’s second-biggest economy. Gains in shares were limited after Italy’s debt rating was cut by Moody’s Investors Service.

Fanuc Corp. (6954), which supplies robots for Chinese factories, added 2.5 percent. Canon Inc. (7751), a camera maker that gets 31 percent of its revenue in Europe, fell 1.1 percent. Dentsu Inc., Japan’s biggest advertising agency, fell 7 percent after agreeing to buy Britain’s Aegis Group Plc in a 3.16 billion- pound ($4.9 billion) deal.

The Nikkei 225 Stock Average (NKY) rose less than 0.1 percent to 8,724.12 at the 3 p.m. trading close in Tokyo, snapping a six- day loss. The gauge slid 3.3 percent this week, the first weekly loss in six weeks. The broader Topix Index dropped 0.2 percent to 746.34 after swinging between gains and losses 25 times.

“The market is asking for more policy measures out of China, and I’m concerned investors’ hopes may be too high,” said Akihiro Tsunoda, a senior investment manager at Sompo Japan Nipponkoa Asset Management Co., which oversees about 5 trillion yen ($63 billion). “It was about time for a rebound because there haven’t been convincing factors to justify a six-day loss.”

The Topix rebounded about 7.3 percent since June 4, when it closed at its lowest since 1983, as concern eased about Europe’s debt crisis after bailout terms were eased for lenders and on optimism central banks around the world will ease policy.

The gain has lifted the average price of shares on the Japanese gauge to 0.9 times book value, compared with 2.1 times for the Standard & Poor’s 500 Index and 1.4 times for the Europe Stoxx 600 Index. A number below one means investors can buy companies for less than the value of their assets.

China Slowdown

China’s economy expanded 7.6 percent last quarter from a year earlier, the government said today. It was the slowest growth in three years, missing economists’ estimates of a 7.7 percent expansion. Industrial production and retail sales also increased at a slower pace in June. Separately, Singapore’s economy unexpectedly shrank and South Korea’s central bank cut the nation’s outlook.

China’s new loans beat estimates in June, boosting odds the government will secure an economic rebound. Banks extended 919.8 billion yuan ($144.2 billion) of local-currency loans, the People’s Bank of China said yesterday. That compares with the 880 billion yuan median forecast in a Bloomberg News survey.

Exporters to China rose. Fanuc added 2.5 percent to 12,410 yen. Hitachi Construction Machinery Co (6305), a machinery maker that depends on China for 17 percent of its sales, gained 1.3 percent 1,346 yen.

Italy Downgrade

Futures on the S&P 500 (SPXL1) rose 0.2 percent today. The gauge fell 0.5 percent in New York yesterday, dropping for a sixth day, the longest losing streak since May 18, on concern that the global slowdown is hurting earnings.

Companies that do business in Europe fell after Italy’s sovereign debt rating was cut by Moody’s, which maintained its negative outlook. The euro area’s third-biggest economy faces higher funding costs, slower growth and contagion risk from Greece and Spain.

Canon lost 1.1 percent to 2,971 yen. Konica Minolta Holdings Inc. (4902), a maker of photo films that gets 28 percent of its sales in Europe, fell 1 percent to 580 yen.

The Nikkei 225 Volatility Index (VNKY) fell 3.8 percent to 18.97, indicating traders expect a swing of about 5.4 percent on the benchmark gauge over the next 30 days. Trading volume on the Nikkei 225 was 4.7 percent above the 30-day average after traders settled on the price of options on the equity benchmark for July.

Dentsu Drops

Dentsu fell the most on the Nikkei 225 after agreeing to buy Aegis Group. The transaction, the biggest in Dentsu’s history, will probably boost its goodwill assets to just under 340 billion yen ($4.3 billion), Bank of America Merrill Lynch said in a report dated July 12. The advertising company’s stock slumped 7 percent to 2,145 yen, the biggest decline since March 2011.

“There need to be good business synergies to justify the price,” Masamitsu Ohki, a fund manager at Tokyo-based Stats Investment Management Co., said by phone today. “Taking all those into consideration, the deal may be negative for Dentsu stock.”

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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