Bloomberg News

Nikkei 225 Rises to Eight-Month High on LDP Win, Tepco

December 17, 2012

Japanese shares gained, with the Nikkei 225 (NKY) Stock Average rising to its highest in eight months, as the yen fell after the Liberal Democratic Party regained power. Tokyo Electric Power Co. led gains on expectations the new government will allow the restart of nuclear reactors.

Tokyo Electric, also known as Tepco, surged 33 percent to lead utilities higher. Fast Retailing (9983) Co., Asia’s biggest clothing retailer, gained 2.9 percent. Toyota Motor Corp., the world’s biggest carmaker, rose 0.6 percent after the yen weakened against the dollar. Property-developer Tokyo Tatemono Co. increased 5.9 percent.

The Nikkei 225 rose 0.9 percent to 9,828.88 at the 3 p.m. close of trading in Tokyo, its highest close since April 3. The measure has gained 13 percent since Nov. 14 when elections were announced. The LDP has called for more easing and a doubling of the nation’s inflation goal. The broader Topix Index climbed 0.9 percent to 807.84, with about two stocks gaining for each that fell.

“The market hasn’t priced in this kind of a landslide win,” said Hideyuki Ishiguro, senior strategist at Okasan Securities Co. in Tokyo. “There’s more certainty that LDP will make progress in deflation-fighting agenda. This could be a turning point for Japanese stocks.”

The LDP yesterday captured 294 seats in the 480-member lower house of parliament, while Prime Minister Yoshihiko Noda’s Democratic Party of Japan lost three-fourths of its lawmakers, according to public broadcaster NHK’s vote count. LDP leader Shinzo Abe, 58, is set to replace Noda, returning to the office he left five years ago for health reasons.

Economy Reeling

Japan’s economy, still reeling from last year’s record earthquake and nuclear disaster, last quarter fell into its fifth technical recession in 15 years, while confidence among the country’s largest manufacturers slid to the lowest in about three years, according to the Bank of Japan’s Tankan index.

Fast Retailing, the operator of the Uniqlo clothing store, gained 2.9 percent to 20,500 yen. Tokyo Tatemono jumped 5.9 percent to 362 yen. Mitsubishi UFJ Financial Group Inc., the nation’s biggest bank by assets, rose 1.8 percent to 395 yen.

Smaller companies also gained today, with the Jasdaq Top-20 Index (JASDAQ20) rising for ninth consecutive day, its longest winning streak on record. Jasdaq Securities Exchange Inc. is Japan’s biggest market for start-up companies, and the Jasdaq Top-20 measures the best performers on the exchange.

‘Investors Relieved’

“Investors are relieved for now,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees about $6.3 billion. The LDP “obtained a lot more seats than was expected, so there may be more optimism that they can implement policies. A lot of the expectations for their monetary easing has been priced into stocks, so for things to rise further, they need to make it a reality.”

The Japanese yen weakened to the lowest level against the dollar since April 2011 on bets Abe’s victory in Japan’s general election adds to the case for the nation’s central bank to expand stimulus as early as this week.

Exporters advanced. Toyota Motor increased 0.6 percent to 3,620 yen. Nissan Motor Co., which counts North America as its biggest market for sales, rose 1.8 percent to 799 yen. Sony Corp. (6758), Japan’s biggest exporter of consumer electronics, rose 1.4 percent to 919 yen.

“This is going to have a tremendous impact on the fortunes of Japanese exporters and the economy,” Ed Rogers, chief executive officer at Tokyo-based Rogers Investment Advisors, said in a Bloomberg Television interview today. “The moves in the dollar-yen indicate that the world at large believes that we’re starting on the path to reflation.”

Nuclear Power

Electricity suppliers lead gains among the Topix’s 33 industry groups on expectations the new government will allow the restart of nuclear reactors shut in the aftermath of the Fukushima meltdown.

Tokyo Electric Power, owner of the Fukushima nuclear power station, surged 33 percent to 202 yen, the biggest gain on the Nikkei 225. Kansai Electric Power Co. leapt 18 percent to 920 yen, while Chubu Electric Power Co. advanced 9.6 percent to 1,188 yen.

Hiroyuki Hosoda, the chairman of the LDP’s general council, said Japan must restart its nuclear power plants quickly after confirming they are safe in a Nov. 26 interview.

Among stocks that fell, Asahi Glass Co. lost 2.3 percent to 626 yen. The company is likely to post 95 billion yen in operating profit, missing its 100 billion yen forecast, the Nikkei reported, without saying where it got the information.

S&P 500 futures gained 0.2 percent today. The gauge dropped 0.4 percent on Dec. 14, the first weekly decline in a month, as a drop in Apple Inc. shares and concern about a lack of progress in budget talks outweighed a rise in industrial production and data showing China’s manufacturing may expand at a faster pace.

The Nikkei 225 has risen 16 percent this year, its best annual performance since 2009, when the measure climbed 19 percent. The measure’s 14-day relative strength index is at 79 today, its highest level since March 2. Some traders use a reading above 70 as a sign the measure is overbought.

The Topix trades at 0.96 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.5 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.

The Nikkei Stock Average Volatility Index sank 10 percent to 17.51 today, indicating traders expect a swing of about 5 percent on the benchmark gauge over the next 30 days.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net

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


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