Kajima, Japan's Construction Shares Surge on Reconstruction Demand Outlook

Kajima Corp. (1812) surged the most in more than two years, leading gains among Japan’s construction stocks, after the country was stuck by its strongest earthquake on record, boosting expectations for reconstruction demand.

The 95-member Topix Construction Index advanced 6.4 percent as of the 3 p.m. close in Tokyo trading, the only measure among the benchmark gauge’s 33 industry groups to post a gain today. Kajima, Japan’s largest construction firm, rose 22 percent to 259 yen, the biggest increase since Oct. 14, 2008. Taisei Corp. (1801), the third-largest builder, climbed 20 percent to 223 yen, the largest jump since April 24, 2000.

The 8.9-magnitude quake on March 11 and subsequent tsunami as high as 7 meters engulfed towns on the northern coast, washing away buildings, vehicles and boats. Policy makers will need to compile a spending bill “over the medium to long-term” to cope with the aftermath of the earthquake, Chief Cabinet Secretary Yukio Edano said on the national broadcaster NHK.

“The government is currently considering a bill to provide subsidies for construction companies and home builders,” said Masahiro Mochizuki, an analyst at Credit Suisse Securities (Japan) Ltd. in Tokyo. “Those stocks will probably outperform in short to long term.”

Daiwa House Industry Co., Japan’s biggest home builder, rose 12 percent to 1,099 yen.

Damage Costs

By contrast, shares of Japanese developers declined on concerns that their earnings may be pressured as costs may rise to repair existing buildings. The Topix Real Estate Index (TPREAL), which tracks 44 property firms, fell 8.7 percent to a three-month low.

“Investors are worried that cost to repair damage caused by the quake will rise and sales may decline for those who own buildings in the areas that were hit by the quake,” said Mochizuki. “Some developers may post extraordinary losses.”

Mitsui Fudosan Co., Japan’s largest developer, dropped 9.1 percent to 1,454 yen, while Sumitomo Realty & Development Co., the third biggest, sank 9.5 percent to 1,816 yen. Mitsubishi Estate Co., the second biggest, lost 6.8 percent to 1,509 yen.

Shopping malls near Tokyo bay area owned by Japan’s largest developers have stopped operation, Mitsui Fudosan, Mitsubishi Estate and Mori Building Co. said on their websites.

Mitsui Fudosan will suspend operation of Ikspiari shopping mall and Venus Fort, a shopping mall located on Odaiba Island owned by Mori Building, one of Japan’s largest privately held developers, the companies said. Aqua City, owned by Mitsubishi Estate and also located in Odaiba Island, is closed for safety examination, the company said.

To contact the reporter on this story: Kathleen Chu in Tokyo at Kchu2@bloomberg.net; Katsuyo Kuwako in Tokyo at kkuwako@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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