Bloomberg News

Nikkei 225 Advances Most in Month on Earnings Optimism

July 26, 2012

Japanese stocks rose for the first time in five days, with the Nikkei 225 (NKY) Stock Average gaining the most in a month, on earnings optimism as Fanuc (6954) Corp. reported higher profit and as JFE Holdings Inc.’s forecast for net income topped estimates.

Fanuc, the world’s largest maker of factory robotics, advanced 5.3 percent after reporting an increase in first- quarter net profit. JFE Holdings Inc. climbed 2.3 percent after the steelmaker forecast net income of 80 billion yen. Olympus Corp. (7733) led gains on the Nikkei 225 as Terumo Corp. moved to merge with the optics maker.

The Nikkei 225 advanced 0.9 percent to 8,443.10, its biggest gain since June 29, at the 3 p.m. close of trading in Tokyo. The broader Topix Index (TPX) rose 1.2 percent to 714.91, with more than five shares rising for each that declined.

“We’re probably going to see this first quarter for fiscal 2012 posting the first positive sequential rise in profitability for corporate Japan,” Kathy Matsui, chief Japan strategist at Goldman Sachs Group Inc. in Tokyo, said in a Bloomberg TV interview. “On the one hand you’re going to see a lot of weakness from global cyclical export companies. On the other hand you’re going to see surprisingly resilient results coming from domestic demand-oriented companies.”

The Topix fell 18 percent from this year’s high on March 27 amid concern the U.S. and Chinese economies are slowing and that Europe’s debt crisis will worsen. The decline has left shares on the Topix valued at 0.8 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.4 for the Stoxx Europe 600 Index. A number below one means investors can buy companies for less than the value of their assets.

Futures on the S&P 500 were little changed today. The gauge lost less than 0.1 percent in New York yesterday, erasing gains in the final hour of trading, after a report showed demand for new U.S. homes unexpectedly dropped in June from a two-year high.

Fanuc Rises

Fanuc advanced 5.3 percent to 12,680 yen. Net income rose 1.5 percent to 35.2 billion yen ($450 million) in the three months ended June 30 while sales rose 4.9 percent to 137.8 billion yen, the company reported yesterday.

Hitachi Construction Machinery Co. (6305) climbed 6.2 percent to 1,341 yen as operating profit in the first quarter beat analyst estimates. Machinery stocks also rose after U.S. bellwether Caterpillar Inc. raised its earnings outlook.

JFE rose 2.3 percent to 991 yen as Japan’s second-largest steelmaker forecast full-year net income of 80 billion yen, beating the 69.5 billion yen forecast by 16 analysts in a Bloomberg survey.

Gains were limited after Il Houng Lee, the International Monetary Fund’s senior representative in China, yesterday said the Chinese government will probably maintain the “status quo” after already shifting monetary stance to a “more neutral or accommodating one” and may forgo expanding this year’s budget.

Olympus Merger

Olympus soared 9.6 percent to 1,400 yen. Terumo, Asia’s biggest maker of medical devices, said it proposed investing 50 billion yen in the endoscope manufacturer. Olympus is also in discussions with Sony and Fujifilm Holdings Corp. about possible tie-ups, Olympus Chairman Yasuyuki Kimoto said in a July 23 interview.

Nomura Holdings Inc. (8604) advanced 5.7 percent to 259 yen. Koji Nagai, president of the domestic brokerage unit, will be promoted to chief executive officer to replace Kenichi Watanabe, according to two people with knowledge of the matter.

Watanabe and Chief Operating Officer Takumi Shibata will step down to take responsibility for incidents in which employees leaked information about clients’ share sales to traders, two people said earlier today, asking to remain anonymous before an announcement.

Nomura, Japan’s largest brokerage, today reported first- quarter profit fell 89 percent to 1.9 billion yen.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

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


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