BLBG: Japanese Stocks Advance; Banks Gain, Trading Houses Decline on Oil Price
Japanese stocks rose after Citigroup Inc. reported profit that exceeded analysts’ estimates, boosting the outlook for corporate earnings. Trading houses dropped as the price of oil declined.
Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., Japan’s top two banks by market value, climbed at least 1.6 percent. Sumitomo Chemical Co., a maker of chemical products, advanced 3.1 percent after Mitsubishi UFJ Morgan Stanley Securities Co. raised its investment recommendation to “outperform.” Mitsubishi Corp., Japan’s largest commodities trader, fell 0.9 percent.
The Nikkei 225 Stock Average climbed 0.4 percent to 9,539.45 at the 3 p.m. close in Tokyo, its first advance in three days. The broader Topix index gained 0.4 percent to 833.73 after falling less than 0.1 percent with about the same number of stocks advancing as declining.
“Market sentiment is improving,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Expectations for corporate earnings in the financial sector are rising after the better-than-expected results at Citigroup.”
The Topix has declined 8.1 percent in 2010, compared with gains of 6.2 percent by the Standard & Poor’s 500 Index and 5 percent by the Stoxx Europe 600 Index. Stocks in the Japanese benchmark are valued at 14.9 times estimated earnings, compared with 14.1 times for the S&P and 12.3 times for the Stoxx.
Futures on the S&P 500 slid 0.6 percent today. The index rose 0.7 percent yesterday in New York to the highest level since May 3 following Citigroup’s results and as an unexpected drop in U.S. industrial production added to signs the Federal Reserve will help stoke the economic recovery.
Banks Lead Gains
Banks were the biggest support for the Topix’s gain. Mitsubishi UFJ rose 1.6 percent to 388 yen. Sumitomo Mitsui Financial Group, Japan’s second-largest publicly traded bank, increased 1.7 percent to 2,400 yen. Mizuho Financial Group Inc., the No. 3, climbed 2.6 percent to 120 yen.
Upward revisions in corporate earnings are expected ahead of mid-term company reports because of lower credit costs and improvement in revenue, Hironari Nozaki, an analyst at Citigroup Global Markets Japan Inc., wrote in a Japanese-language report dated today. Next week is Japan’s busiest period for half-year earnings statements, according to Bloomberg data.
“Japanese banks are at their recent low levels, so the stocks are rebounding,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $104 billion. “If the economy gets better, interest rates rise and more people borrow money, we can expect a long-term increase in bank shares.”
Sumitomo Chemical Jumps
A gauge that includes Japanese banks traded at 112.73, 1.8 percent higher than this year’s low of 110.71 reached on Oct. 4.
Sumitomo Chemical jumped 3.1 percent to 366 yen, the highest close since Sept. 30. The company had its rating raised to “outperform” from “neutral” at Mitsubishi UFJ Morgan Stanley Securities, which said the company’s earnings forecast is “conservative.” The brokerage’s analyst Shuichi Nakahara raised his estimate for full-year operating profit to 88 billion yen ($1.08 billion) from 71 billion yen.
Nintendo Co., the world’s biggest maker of portable video- game players, advanced 0.9 percent to 21,030 yen. The company was rated “overweight” in new coverage by Hiroshi Kamide, an analyst at JPMorgan Chase & Co. Nintendo’s 3DS handheld game player will help boost the stock, Kamide said in a Japanese- language report dated today. He set a 12-month share price estimate at 27,000 yen.
Tepco Share Sale
An increase in the number of Tokyo Electric Power Co. stocks after the company’s share sale will be reflected on the Topix index tomorrow. Investors who use the Topix index as a benchmark may sell stocks to get funds to buy Tepco shares, said Yoshifumi Kikuchi, head of the dealing division at Tokyo-based Nissan Century Securities Co.
Tepco, Asia’s largest electricity generator, said on Sept. 29 it plans to raise as much as 555 billion yen by issuing 254.15 million shares in Japan and overseas.
Trading companies and petroleum producers dropped, reversing gains, as the price of oil slid. Mitsubishi Corp., Japan’s largest commodities trader, fell 0.9 percent, reversing an advance of 0.8 percent. Mitsui & Co., Japan’s No. 2 trading house, sank 1 percent to 1,329 yen. Inpex Corp., Japan’s biggest oil-explorer, declined 1.1 percent after rising as much as 1.4 percent.
Crude oil for November delivery lost as much as 0.6 percent to $82.58 a barrel in electronic trading in New York today.
To contact the reporter for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net.
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.
