Bloomberg News

Japanese Stocks Drop as Insurers, Shipping Companies Fall

July 20, 2012

July 20 (Bloomberg) -- Japanese stocks fell, with the Nikkei 225 Stock Average capping a second weekly loss, as brokerages and insurers dropped after U.S. economic reports missed estimates.

Toyota Motor Corp. (7203), a carmaker that depends on North America for 25 percent of its sales, dropped 1.8 percent. Mito Securities Co. led brokerages lower. Tokio Marine Holdings Inc. fell 3.4 percent, pacing declines among insurers. Yamato Holdings (9064) Co. declined 2.4 percent on a report operating profit slid at the parcel delivery service.

The Nikkei 225 fell 1.4 percent to 8,669.87 at the 3 p.m. trading close in Tokyo, dropping 0.6 percent this week. The broader Topix Index slid 1.8 percent to 733.82, with about seven stocks dropping for each that rose. The gauge has fallen 10 out of 11 days.

“The shape of recovery is still uncertain,” said Prasad Patkar, who helps oversee about $1 billion at Platypus Asset Management Ltd. in Sydney. “Equity investors need to be patient in any case, but more so at the present time. Valuations are low, which means dividend yields are reasonable.”

The Topix rebounded 5.5 percent from a 29-year low reached on June 4 as concern eased about Europe’s debt crisis and central banks around the world cut rates to shore up growth. Foreign investors sold 133.8 billion yen in stocks last week, according to the Ministry of Finance.

Topix Valuation

Shares on the index are valued at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index (SPXL1) and 1.4 for the Europe Stoxx 600 Index. A number below one means investors can buy companies for less than the value of their assets.

Companies that do business in the U.S. fell after U.S. existing home sales unexpectedly fell and manufacturing in the Philadelphia region contracted for a third month.

“It’s hard to buy exporters because negative macro reports out of the U.S. are keeping the yen in demand amid speculation U.S. policy makers may do a third round of quantitative easing,” said Kuninobu Takeuchi, Tokyo-based executive portfolio manager at DIAM Co, which manages about 10 trillion yen ($127 billion).

Toyota declined 1.8 percent to 2,967 yen. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, dropped 2.2 percent to 958 yen.

Brokerages and insurers fell the most among the Topix’s 33 industry groups. Mito Securities slumped 8 percent to 139 yen. Tokio Marine lost 3.4 percent to 1,857 yen.

Futures on the Standard & Poor’s 500 Index fell 0.3 percent today. The gauge added 0.3 percent in New York yesterday after International Business Machines Corp., the biggest computer- services provider, and EBay Inc. (EBAY:US), the largest Internet marketplace, beat profit forecasts.

Earnings Season

Japan’s earnings season is starting in earnest next week, with 209 of the 1,671 companies listed on the Topix Index scheduled to report results.

Yamato Holdings dropped 2.4 percent to 1,245 yen after the Nikkei newspaper reported the delivery company’s operating profit fell about 30 percent to around 5 billion yen in the quarter ended June from a year earlier. Competition weighed on prices and profitability, the newspaper without citing anyone. Yamato is due to report results on July 31.

The Nikkei 225 (NKY) Volatility Index fell 0.5 percent to 17.60, indicating traders expect a swing of about 5 percent on the benchmark gauge over the next 30 days. Trading volume on the gauge was 2.1 percent above the 30-day average.

Among stocks that rose, Toshiba Corp. added 1.1 percent to 285 yen after chipmaking partner SanDisk Corp. posted profits that topped analysts’ estimates. SanDisk yesterday said profit was 21 cents a share, excluding some items, saying that demand for memory from corporate customers and international markets is helping the industry rebound.

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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