Most Japan Stocks Climb as Valuation Falls to 2008 Levels

Most Japanese stocks rose on speculation they are undervalued and as European leaders clashed on methods to tackle the debt crisis and keep Greece in the monetary union.

Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipping line, rallied 5.1 percent after falling 5.8 percent last week. Sharp Co. (6753) jumped 7.1 percent on report the electronics maker will produce liquid-crystal display panels in China with Hon Hai Precision Industry Co. Canon Inc. (7751), a camera maker that counts Europe as its biggest market, dropped 2.2 percent.

The Nikkei 225 Stock Average (NKY) rose 0.1 percent to 8,563.38 at the 3 p.m. close in Tokyo, after swinging between gains and losses about 15 times. Volume on the gauge was 5.7 percent above the 30-day average. The broader Topix Index added 0.1 percent to 722.25, after earlier falling as much as 0.7 percent.

“Investors are so sensitive about European debt that they are swayed by every remark on the issue,” said Naoki Fujiwara, who helps oversee $6.6 billion at Shinkin Asset Management Co. in Tokyo. “Some people are inclined to buy shares because Japanese stocks are undervalued.”

Shares on the Topix closed at their lowest price to book ratio since 2008 at the end of last week. The 25-day Toraku index, which compares advancing and declining shares, fell to 67.2 yesterday. A reading below 70 suggests stocks are close to bottoming.

Kawasaki Kisen jumped 5.1 percent to 144 yen. Nidec Tosok Corp., a precision machinery maker that plunged 19 percent last week, soared 7.1 percent to 724 yen.

Sharp Surges

Sharp, Japan’s largest maker of liquid-crystal displays, gained the most on the Nikkei 225, climbing 7.1 percent to 395 yen after the Nikkei newspaper reported the company is in talks with Taipei-based Hon Hai to provide technology for a new LCD factory in Chengdu, China.

The Topix (MXAP) has plunged 17 percent from this year’s high on March 27 as China’s economic growth slowed, and on renewed concern about Europe’s debt crisis. The political gridlock in Greece after an inconclusive election this month reignited concern the nation will renege on austerity pledges required for 240 billion euros ($302 billion) in aid and exit the euro.

Futures on the Standard & Poor’s 500 Index were little changed today as European leaders clashed over joint bond sales at the EU summit in Brussels, while they called on Greece to stick with austerity measures needed to stay in the euro. Greece is scheduled to have a second election on June 17.

The 18th summit in more than two years of crisis fighting was marked by new French President Francois Hollande challenging the German-dominated deficit-cutting orthodoxy that has failed to stabilize the euro area and led to speculation that Greece might be forced out.

Euro Clash

Germany has “huge difficulties” with France’s call for joint borrowing by euro governments, Chancellor Angela Merkel told reporters in Brussels early today after six hours of talks. “We took varying positions on euro bonds. I laid out our German position that we need much stronger economic cooperation in the euro area.”

Canon lost 2.2 percent to 3,160 yen. Nintendo Co., a video-game console maker that gets a third of its revenue from Europe, slipped 1.7 percent to 8,950 yen, its lowest since 2003.

The S&P added 0.2 percent in New York yesterday, reversing a decline of as much as 1.5 percent, after Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said the central bank has the tools to insulate the U.S. economy should Europe’s debt crisis worsen.

Some exporters fell after a private survey showed China’s manufacturing may shrink for a seventh month in May. The 48.7 preliminary reading for a purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics compares with 49.3 for April. If confirmed June 1, it would mark the longest run of below-50 readings since the global financial crisis.

TDK Corp. (6762), a manufacturer of electronic parts which gets about 60 percent of its revenue from Asia, fell 2 percent to 3,420 yen. Ebara Corp., a pump maker that gets more than a fifth of its revenue in the region, slid 1 percent to 293 yen.

-- With assistance from Toshiro Hasegawa in Tokyo. Editors: Jim Powell, Drew Gibson.

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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