Bloomberg News

Topix Rises to Highest Since July on U.S. Housing, Yen

November 21, 2012

Japanese stocks rose, with the Topix (TPX) Index closing at its highest level since July, as new U.S. home construction rose to a four-year high and the yen weakened after Japan posted a trade deficit for a fourth month.

Canon Inc. (7751), the world’s biggest camera maker, rose 1 percent. Honda Motor Co. (7267) jumped 3.2 percent after McKinsey & Co. said China’s passenger-vehicle sales will expand by an average 8 percent a year. Japan Steel Works (5631) Ltd. sank 5.8 percent after SMBC Nikko Securities Inc. cut its equity rating on the machinery maker to underperform.

The Topix gained 0.7 percent to close at 767.01 in Tokyo, with more than twice as many shares advancing as falling. The Nikkei 225 Stock Average (NKY) rose 0.9 percent to 9,222.52, with volume 6.3 percent above the 30-day average.

The trade deficit is “allowing investors to expect the yen will weaken, which is positive for stock markets,” said Goya Nakao, a senior investment manager at Sompo Japan Nipponkoa Asset Management Co., which oversees about 5 trillion yen ($61 billion). “U.S. housing has entered a long-term upward trend because housing inventories and prices have adjusted.”

The Topix has risen 6.2 percent since Nov. 14, when Prime Minister Yoshihiko Noda called for elections that polls show the opposition party is likely to win. That’s the gauge’s biggest gain over a five-day period since March 2011.

Japan’s broadest measure of equity prices trades for 0.9 times book value, compared with 2.1 times for the Standard & Poor’s 500 Index and 1.5 times for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than the value of their assets.

Talks Deadlock

Japanese stocks temporarily pared gains after European finance ministers failed to agree on a debt-reduction package for Greece after battling with the International Monetary Fund over how to nurse the country back to fiscal health.

More than 11 hours of talks broke up early today in Brussels with praise for the Athens government’s economic overhaul and a declaration that an accord on the financing package will wait at least until a hastily arranged meeting of the ministers on Nov. 26.

Exporters got a boost after the yen declined against the dollar as Japan reported its fourth monthly trade deficit in a row. The Finance Ministry said overseas shipments fell 6.5 percent in October from a year earlier, leaving a deficit of 549 billion yen ($6.7 billion) after imports fell 1.6 percent. Economists expected a 4.9 percent drop in exports. The yen depreciated to as low as 81.97 against the dollar.

Canon rose 1 percent to 2,820 yen. Brother Industries Ltd., a maker of office equipment that gets more than 75 percent of its sales overseas, gained 1.8 percent to 747 yen.

Car Sales

Carmakers and tire manufacturers gained the most among the Topix’s 33 industry groups. McKinsey said China’s passenger- vehicle sales will expand by an average 8 percent a year to reach 22 million in 2020, driven by demand for sport-utility vehicles and rising incomes in smaller cities.

Honda Motor jumped 3.2 percent to 2,657 yen. Nissan Motor Co. advanced 2.1 percent to 766 yen.

Bridgestone, a tiremaker that counts the Americas as its biggest market, gained 2.8 percent to 1,957 yen. Yokohama Rubber Co., which supplies tires to Japan’s top carmakers, added 2.1 percent to 547 yen.

Futures on the Standard & Poor’s 500 Index fell 0.3 percent today. The S&P 500 added 0.1 percent yesterday as the increase in housing starts tempered a tumble in Hewlett-Packard Co. shares. Federal Reserve Chairman Ben S. Bernanke said the central bank doesn’t have the tools to offset the potential harm to the economy from the so-called fiscal cliff.

Fiscal Cliff

If talks between President Barack Obama and the Republicans and Democrats fail to produce an agreement on the U.S. budget, it will trigger more than $600 billion in automatic tax increases and spending cuts that may throw the country into a recession.

U.S. Housing starts rose 3.6 percent to 894,000, exceeding all estimates in a Bloomberg survey, Commerce Department figures showed yesterday in Washington. The median forecast of 82 economists called for an 840,000 pace.

Among shares that declined, Japan Steel Works declined the most in the Nikkei 225, falling 5.8 percent to 469 yen after SMBC Nikko Securities cut the investment rating to underperform from neutral.

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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