Japanese stocks rebounded from yesterday’s plunge as U.S. data beat estimates and concerns eased the Federal Reserve will soon reduce stimulus. Shares also gained after Nomura Holdings Inc. and Fidelity Worldwide said the country’s market would climb to new highs.
Nissan Motor Co., the country’s second-largest carmaker, added 0.7 percent. Real-estate shares led advances as all but three of the 33 Topix index industry groups rose. Kawasaki Heavy Industries Ltd., the nation’s No. 2 maker of heavy equipment, climbed 4.3 percent after removing its president and ending merger talks with Mitsui Engineering & Shipbuilding Co.
The Topix added 1.2 percent to 1,056.45 at the close in Tokyo, after climbing as much as 3.2 percent. The gauge rose for a first day in four, paring this week’s loss to less than 0.1 percent. The Nikkei 225 Stock Average, which fell into a bear market yesterday after retreating more than 20 percent from a May 22 high, increased 1.9 percent to 12,686.52, after jumping as much as 3.6 percent.
“Psychologically the market feels like we’re nearly done with the correction,” said Juichi Wako, a Tokyo-based strategist at Nomura, Japan’s largest brokerage. “It’s a good sign the rise in long-term interest rates didn’t harm the U.S. economy. It’s leading to a sense of security in the market.”
The Nikkei 225 plunged on May 23 and entered a bear market yesterday. Shares have fallen amid a strengthening yen, disappointment about Prime Minister Shinzo Abe’s delay in implementing a growth strategy and concern the Fed will scale back stimulus.
With more than $500 billion wiped from Japan’s market capitalization from the May high through yesterday, brokerages and investors are seeing buying opportunities.
“Assuming that Abenomics has not been defeated, we see no reason to become bearish on Japanese stocks, and recommend a bullish stance,” analysts led by Hiromichi Tamura at Nomura wrote in a report yesterday. The brokerage increased its year-end estimate for the Topix to 1,500 from 1,350, while boosting the outlook for earnings per share to 82.5 from 75.
Earnings for Topix companies will jump 53 percent this fiscal year to 78.85 yen a share, according to analyst estimates compiled by Bloomberg. After retreating 18 percent since May 22, the gauge is trading at 13.4 times estimated earnings, compared with 16.6 in May and the three-year average of 14.6. The Standard & Poor’s 500 Index, where earnings are expected to rise 11 percent this year, trades for 14.8 times forecast profit.
“There are reasons to be optimistic that further weakness will be temporary and that the peak is not behind us,” Alex Treves, head of equities Japan for Fidelity Worldwide, which manages about $248 billion, said by e-mail. “The key drivers of the rally remain intact, valuations are still reasonable and earnings are projected to recover to 2007 highs.”
Even after the correction, the Topix has climbed 22 percent this year, making it the best-performing major equity gauge.
Japan’s broader measure has swung an average of 3.5 percent daily since May 22. Its 30-day historic volatility reached 41.80 today, the highest level since the 2011 earthquake.
Shares advanced even as the yen strengthened against the dollar for a fourth day. The currency traded at 94.97 as of 3:10 p.m. in Tokyo, gaining versus its major peers and poised for a weekly advance against all 16, as the most volatile currency markets in a year spurred investors to buy assets considered less risky.
Kawasaki Heavy gained 4.3 percent to 319 yen. The firm fired Satoshi Hasegawa as president and said it ended talks to merge with Mitsui Engineering, two months after denying the two companies had entered discussions to combine.
The Tokyo Stock Exchange said today it asked Kawasaki Heavy, which yesterday appointed Shigeru Murayama, head of the company’s aerospace business, as its new president, to explain why it revised its April 22 filing, which had said reports of merger talks weren’t true. Mitsui Engineering sank 5.5 percent to 137 yen, the biggest decline on the Nikkei 225.
Trend Micro Inc. added 6.3 percent to 3,070 yen after the maker of anti-virus software said it began supplying systems to a unit of Nippon Telegraph & Telephone Corp.
Zappallas Inc. (3770) slumped 11.4 percent to 68,300 yen, the biggest fall on the Topix, after the maker of content for mobile phones forecast a 32 percent decline in profit.
Futures on the S&P 500 lost 0.1 percent, after the gauge added 1.5 percent yesterday as retail sales climbed the most in three months and jobless claims dropped. Stocks and Treasuries also rose yesterday as the Wall Street Journal reported the Fed may “push back” on expectations for higher borrowing costs.
To contact the reporters on this story: Adam Haigh in Sydney at firstname.lastname@example.org; Toshiro Hasegawa in Tokyo at email@example.com
To contact the editor responsible for this story: Nick Gentle at firstname.lastname@example.org