Japanese Stocks Advance to Close Worst Year for Topix Index Since 2008

Japanese stocks (TPX) rose on 2011’s last day of trading, lifted by signs of U.S. economic recovery, with the Topix (TPX) Index posting its steepest annual decline since 2008 in a year marred by natural disasters, nuclear meltdowns and a crisis in Europe.

Japan’s record earthquake and tsunami on March 11 largely decided the year’s biggest winners and losers. Tokyo Electric Power Co. (9501), owner of the Fukushima power plant wrecked in the disaster, dropped 91 percent. SxL Corp. (1919), a builder that has benefited from reconstruction work, surged 262 percent.

The Topix (TPX) plunged 16 percent in the two trading days following the disaster, which left almost 20,000 people dead or missing and disrupted factory production at companies from Toyota Motor Corp. to Sony Corp. The market plummeted 16 percent in the two days after the quake, its biggest drop since the week of Black Monday in October 1987.

“Japan’s markets suffered from multiple negative factors that other countries didn’t face, such as the earthquake and the yen’s strength,” said Takashi Aoki, who helps manage 120 billion yen at Tokyo-based Mizuho Asset Management Co. “Next year, the markets are likely to rebound.”

Topix Drops

For the year, Japan’s broadest benchmark of equities fell 19 percent, eclipsing a 12 percent decline on the Stoxx Europe 600 Index, ground zero for the debt crisis.

The Topix added 0.9 percent to 728.61 today. The Nikkei 225 Stock Average (NKY) rose for the first time in four days, climbing 0.7 percent to 8,455.35. Trading volume was about half the 100-day average ahead of a four-day weekend, according to data compiled by Bloomberg.

Futures on the Standard & Poor’s 500 Index (SPXL1) rose 0.1 percent today. The gauge advanced 1.1 percent yesterday in New York as the number of Americans filing for jobless benefits dropped to the lowest since June 2008. Stocks also advanced as pending sales of existing homes jumped 7.3 percent in November, beating economists’ estimates by almost five times.

“Investors increasingly feel the U.S. economy is firmer than they had expected,” said Toshiyuki Kanayama, a market analyst at Tokyo-based Monex Inc. “The economic data is looking good and that will boost stock markets, especially when concern about Europe’s debt issues aren’t in the forefront.”

2012 Market Projection

Japanese stocks may rise next year for the first time since 2009, with analysts projecting a 20 percent gain on the Topix Index (TPX), as the lowest valuations in almost three years lure investors.

The Topix may reach 873 by the end of 2012 after closing this year at 728.61, according to the median estimate of 21 strategists and investors surveyed by Bloomberg News. The gain would be the biggest since 2005 on the Topix, the worst- performing major benchmark since the depths of the financial crisis in March 2009.

Analysts at banks from Morgan Stanley to Credit Suisse Group AG a year ago predicted Japan’s broadest equities index would gain more than 10 percent in 2011. Instead, the March earthquake and ensuing nuclear crisis, floods in Thailand and a surge in the yen sent the gauge plunging.

The following are among the most active shares in the Japanese market (NKY) today. Stock symbols are in parentheses after company names.

Chiyoda Corp. (6366) (6366 JT), an engineering company, gained 2.1 percent to 783 yen after the Nikkei newspaper reported operating profit will likely beat its outlook by as much as 3 billion yen ($39 million) in the fiscal year ending March due to less-than- expected costs for a liquefied natural gas project in Qatar.

Himaraya Co. (7514) (7514 JT), a sporting-goods retailer, slumped 6.4 percent to 524 yen, the biggest drop since June 30, after saying it had a net loss of 267 million yen in the nine months ended Nov. 30, citing lower sales of golf gear.

Start Today Co. (3092 JT), an operator of websites that sell clothing, jumped 5.3 percent to 1,801 yen. Bank of America Merrill Lynch initiated coverage on the company with a “buy” rating.

-- With assistance from Masaaki Iwamoto and Satoshi Kawano in Tokyo. Editors: Jim Powell, Jason Clenfield.

To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

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

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