Japan's Nikkei 225 Rises to 10,000 for First Time Since June; Banks Climb

Japan’s Nikkei 225 Stock Average rose past 10,000 for the first time since June, led by financial companies on speculation an improving economy will boost earnings, and as the euro advanced against the yen.

MS&AD Insurance Group Holdings Inc. gained 4 percent after the Nikkei newspaper said the insurer will sell about 300 billion yen ($3.6 billion) in shareholdings. Resona Holdings Inc., Japan’s fourth-largest bank, jumped 9.2 percent. Sony Corp., the maker of Bravia televisions which gets 23 percent of its sales from Europe, rose 2.2 percent to 2,945 yen. Showa Denko K.K., a maker of electronic materials, climbed 6.3 percent after UBS AG increased its investment rating to “buy.”

The Nikkei 225 rose 2.1 percent to 10,013.63 in Tokyo, the highest close since June 22. The broader Topix index increased 2.2 percent to 868.81, the most among Asian equity indexes. More than 21 times as many stocks advanced as declined. All of the 33 industry groups in the Topix gained.

“The economic situation is good globally and that’s supporting the financial market,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $104 billion. “People no longer worry that the U.S. economy will slow down, and concerns about the yen’s appreciation have eased.”

Insurance companies gained ahead of earnings reports. MS&AD rose 4 percent to 2,113 yen. The insurer plans to sell shareholdings between fiscal 2011 and fiscal 2013, the Nikkei newspaper reported, without saying how it got the information.

Japan Lags Behind

T&D Holdings Inc. is scheduled to announce its first-half earnings result today and MS&AD, Tokio Marine Holdings Inc. and NKSJ Holdings Inc. will report earnings tomorrow. The companies’ shares advanced at least 4 percent.

The Topix has declined 4.3 percent in 2010, compared with gains of 5.7 percent by the Standard & Poor’s 500 Index in the U.S. and 5.3 percent by the Stoxx Europe 600 Index. Stocks in the Japanese benchmark are valued at 15.3 times estimated earnings on average, compared with 13.9 times for the S&P 500 and 12 times for the Stoxx 600. The MSCI Asia Pacific Index has gained 9.3 percent this year.

“Investors will shift to Japanese stocks, which have lagged behind other markets, particularly from those in other Asian countries that have advanced too far,” said Mitsushige Akino, who oversees about $450 million in assets in Tokyo at Ichiyoshi Investment Management Co.

Banks, Brokers

Banks and securities companies also advanced. In 2010, banks have declined 9.3 percent and brokerages have lost 25 percent, compared with a 4.3 percent drop in the Topix index. Brokerages have had the second-largest decline and banks had the sixth-biggest drop among the 33 industry groups this year.

Resona soared 9.2 percent to 500 yen, the most in the Nikkei. Shinsei Bank Ltd. surged 7.1 percent to 75 yen. Mizuho Securities Co. leapt 7 percent to 199 yen.

The average book value to share price of insurers, brokerages and banks has been below 1 since at least July, according to Bloomberg data. The average price of stocks in the Topix is 1.03 times book value.

Sony rose 2.2 percent to 2,945 yen. Canon Inc., a camera maker which gets 30 percent of its revenue from Europe, increased 1.3 percent to 4,015 yen. Olympus Corp., an optical- instrument maker that derives more than 20 percent of its sales from Europe, climbed 2.9 percent to 2,313 yen. Citizen Holdings Co., a watchmaker that earns more 10 percent of its sales in Europe, gained 1.2 percent to 520 yen.

Euro Climbs

The euro advanced to 113.24 yen as of 12:50 p.m. in Tokyo from 112.66 at yesterday’s close of stock trading. The Irish government will hold talks with the European Union, International Monetary Fund and the European Central Bank “over a number of days,” a Finance Ministry spokesman said yesterday, easing concern Ireland’s debt crisis will spread.

The number of stocks traded on the Tokyo Stock Exchange’s first section was 2.44 billion, the highest since Oct. 6.

“Funds are coming into Japanese stocks,” as the yen’s appreciation has stopped, said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $37 billion. Japanese stocks have been “underweight” among global fund managers because of concerns about the strong yen, he said.

The Japanese currency weakened to as low as 83.40 yen against the dollar, near the weakest level since Oct. 4. That’s weaker than the rate that major Japanese companies expect for the second-half period of the year ending March 31.

Currency Trend

Japanese carmakers such as Honda Motor Co. and Nissan Motor Co. and electronics makers including Canon and Hitachi Ltd. forecast the Japanese currency will trade at 80 yen against the dollar.

“If the trend of the currency becomes clearer, investors’ sentiment should improve further,” Ichiyoshi’s Akino said.

Showa Denko leapt 6.3 percent to 168 yen after UBS AG increased its investment recommendation to “buy” from “neutral.” Nitto Denko Corp., a maker of chemical products, gained 4 percent to 3,630 yen after Goldman Sachs Group Inc. raised its rating to “buy” from “neutral,” citing expected demand for tablet computers.

DIC Corp., a printing-ink producer, soared 7.1 percent to 166 yen after its rating was improved to “buy” from “hold” at Deutsche Bank AG because of its earnings outlook and valuations.

“Foreign hedge funds are buying back Japanese stocks ahead of the fiscal year end,” said Tsutomu Yamada, a market analyst at kabu.com Securities Co. in Tokyo.

To contact the reporter for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net.

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

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.