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Japanese Stocks Rise on Spain Bank Bailout, China Imports

June 11, 2012

Japanese stocks rose, with the benchmark Nikkei 225 Stock Average (NKY) capping the biggest gain since April, on speculation a bailout for Spanish banks will ease Europe’s debt crisis and after China’s trade grew more than expected.

Canon Inc. (7751), a camera maker that gets 31 percent of its revenue in Europe, advanced 3.5 percent. Fanuc Corp. (6954), a manufacturer of robotics controls for Chinese factories, rose 2.1 percent. Sharp Corp. (6753), Japan’s largest maker of liquid- crystal displays, gained 8.2 percent after saying Foxconn Technology Group will start buying its panels earlier than expected as part of a revival plan.

The Nikkei 225 Stock Average added 2 percent to 8,624.90 at the close, the biggest increase since April 18. The gauge rose 0.2 percent last week, snapping a nine-week loss. The broader Topix (TPX) Index gained 1.7 percent to 730.07, with all but two 33 of its industry groups climbing.

“The bailout will keep companies that borrow from Spanish banks from going down all together,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $70 billion. “In China, overseas demand is stronger than expected, while domestic demand continues to slow. That makes it easy to do more monetary easing because it has a direct impact on domestic demand.”

The Topix fell 16 percent from this year’s high on March 27 amid concern the European crisis is deepening and as growth in China slows. Shares on the measure are valued at 0.86 times book value. A number below one means a company can be bought for less than the value of its assets.

‘Market Oblivious’

“The market has been oblivious to valuations because having equities itself is considered risky amid uncertain external factors,” said Kuninobu Takeuchi, Tokyo-based executive portfolio manager at DIAM Co., which manages about $126 billion. “Once people step back and retain a peace of mind, they will look for buying opportunities.”

The Standard & Poor’s 500 Index (SPXL1) advanced 0.8 percent on June 8. Futures on the gauge climbed 1.4 percent today after Spain over the weekend asked euro-zone governments for as much as 100 billion euros ($125 billion) to rescue its banking system. Spain became the fourth nation to seek a bailout after Greece, Ireland and Portugal. Greek voters on June 17 will decide whether to observe requirements for another rescue.

Spain Rescue

“It’s crucial for Spain’s financial system to stabilize because its economy is much bigger than Greece,” Takeuchi at Diam said. “The bailout is bringing an issue to the end. It’s positive for equities.”

Exporters to Europe and banks advanced. Canon added 3.5 percent to 3,240 yen. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender, advanced 1.2 percent to 351 yen.

Companies linked to China gained after the government yesterday reported imports rose 12.7 percent in May and exports advanced 15.3 percent, topping estimates.

Another report showed inflation in China rose the least in two years last month and industrial output and retail sales missed estimates. The data adds pressure for more stimulus after the People’s Bank of China on June 7 reduced key interest rates for the first time since 2008 to bolster slowing growth.

Fanuc gained 2.1 percent to 13,700 yen. TDK Corp. (6762), a maker of electronics components that gets 30 percent of its sales in China, rose 4.8 percent to 3,640 yen.

The Nikkei 225 Volatility Index (VNKY) declined 7.6 percent to 26.38, indicating traders expect a swing of about 7.6 percent on the benchmark gauge over the next 30 days. Trading volume was 10 percent below the 30-day average.

Sharp, Sumco

Sharp advanced 8.2 percent to 424 yen after saying Foxconn’s flagship Hon Hai Precision Industry Co. will start buying displays from its TV panel unit next quarter, three months earlier than planned. The loss-making operation, in which Foxconn is investing, will be taken off Sharp’s balance sheet next month.

Sumco Corp. (3436), a maker of silicon wafers for semiconductors, gained 14 percent to 790 yen. It reported operating profit of 2.9 billion yen ($36 million) for the three months ended April 30, beating the analysts’ estimates of 1 billion yen.

Olympus Corp. (7733) lead declines on the Nikkei 225, dropping 4.1 percent to 1,244 yen after the optics maker said it may sell shares to raise capital.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at

To contact the editor responsible for this story: Nick Gentle at

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