Bloomberg News

Japanese Stocks Advance on China Stimulus Expectations

August 23, 2012

Japanese stocks gained, with the Nikkei 225 (NKY) Stock Average rising to a 15-week high, after a survey indicated China’s manufacturing may contract at a faster pace in August, boosting prospects for stimulus. Shares fell earlier on a strengthening yen.

Daikin Industries Ltd. (6367), an air-conditioner maker that relies on China for nearly a fifth of revenue, advanced 2 percent. Nissan Motor Co. (7201), a carmaker that gets almost half of its sales in North America and Europe, slid 0.6 percent after the yen gained, cutting exporters’ outlook. Sharp Corp. rose 1.1 percent on speculation it may sell its shares in audio-equipment maker Pioneer Corp. (6773), the biggest decliner on the Nikkei 225 today.

The Nikkei 225 climbed 0.5 percent to 9,178.12 at the 3 p.m. close in Tokyo, the highest close since May 8, erasing declines of as much as 0.8 percent. Volume on the gauge was almost 15 percent below the 30-day average. The broader Topix (TPX) Index added 0.2 percent to 764.59, with about eight shares advancing for every seven that fell.

The possible contraction in manufacturing “may boost investors’ expectations that China will step up its stimulus measures to expand domestic demand,” said Kaori Murai, a strategist at Okasan Securities Co., a brokerage affiliate of Sumitomo Mitsui Trust Holdings Inc.

The 47.8 preliminary reading for the purchasing managers’ index released by HSBC Holdings Plc and Markit Economics today compares with a final 49.3 for July. A number below 50 indicates contraction. The gauge hasn’t shown an expansion since October.

Daikin gained 2 percent to 2,159 yen. Nippon Chemi-Con Corp., a condenser maker that counts China as its biggest market, increased 2.4 percent to 171 yen.

Policy Accommodation

Shares also climbed after Federal Reserve Bank of Chicago President Charles Evans said easier monetary policy around the world, including in China, would support growth, broadening his call for more stimulus in the U.S. People’s Bank of China Governor Zhou Xiaochuan yesterday said adjustments to interest rates and bank reserve requirements are still possible after the central bank stepped up temporary cash injections this month.

The Topix lost 13 percent from this year’s peak on March 27 through yesterday on concern earnings will be hurt by Europe’s debt crisis and slowing growth in China and the U.S. Shares on the gauge trade at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.4 for the Europe Stoxx 600 Index. A number less than one means companies can be bought for less than the value of their assets.

Futures on the S&P 500 were little changed today. The gauge rose less than 0.1 percent yesterday, reversing a 0.5 percent drop after the Federal Reserve minutes were released in Washington.

Fed Minutes

Many Fed policy makers said additional monetary easing will probably be needed soon unless the economy shows signs of sustained growth, according to the record of the Federal Open Market Committee’s July 31-Aug. 1 gathering. Central bank officials said after the meeting that they will step up record stimulus if needed to cut a jobless rate stuck above 8 percent since February 2009.

Chairman Ben S. Bernanke will have an opportunity to clarify his views in an Aug. 31 speech at a forum for central bankers in Jackson Hole, Wyoming, where he signaled a second round of bond buying by the Fed in 2010. Fed officials next meet on Sept. 12-13.

“The fact that the Fed is rushing to ease policy is in indication of the downside risks the economy faces,” Akio Yoshino, who helps oversee the equivalent of $32 billion as chief economist at Amundi Japan Ltd. in Tokyo. “And it suggests that the Fed thinks the U.S. economy may not achieve the bank’s forecast for mid-range 2 percent growth. That means companies won’t see profits gaining from their U.S. operations.”

Nissan Declines

Nissan lost 0.6 percent to 777 yen. Kawasaki Heavy Industries Ltd. (7012), a heavy machinery maker that gets almost 30 percent of its sales from the U.S. and Europe, sank 1.6 percent to 180 yen.

The yen appreciated to as high as 78.28 against the dollar today in Tokyo, compared with 79.27 at the close of stock trading yesterday. Against the euro, Japan’s currency strengthened to 98.09 from 98.78. A stronger yen cuts overseas income at Japanese companies when repatriated.

German Chancellor Angela Merkel and French President Francois Hollande meet today to discuss Europe’s fiscal crisis. Merkel signaled she’s willing to discuss Greece’s request for more time to meet the terms of its international rescue, leaving the door open to potential concessions.

Pioneer sank 4.5 percent to 212 yen after Sharp said it may sell its cross-shareholdings and account receivables if Taiwan’s Foxconn Technology Group invests than expected in the electronics maker. Sharp holds a 9.2 percent stake in the audio- equipment maker, according to data compiled by Bloomberg.

Sharp added 1.1 percent to 182 yen. The company also got a boost after broadcaster NHK reported Mizuho Corporate Bank and Bank of Tokyo-Mitsubishi UFJ may provide additional loans to the loss-making company.

To contact the reporter on this story: 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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