Japan’s Topix Caps Biggest Three-Day Advance Since 2011

Japanese stocks rose, with the Topix (TPX) Index capping the biggest three-day advance since March 2011, amid speculation policy makers in the U.S., China and Europe will take action to spur growth amid a deepening debt crisis.

Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, rose 2 percent after the yen weakened, lifting overseas earnings prospects. Inpex Corp. (1662), the nation’s top energy explorer, advanced 3.3 percent as oil climbed for a fourth day. Ricoh Co. gained 4.1 percent after the office automation company was raised to “buy” at Deutsche Bank AG.

The Topix gained 1.7 percent to 730.75 at the 3 p.m. close of trading in Tokyo, with 32 of its 33 industry groups climbing. The Nikkei 225 Stock Average (NKY) rose 1.2 percent to 8,639.72. About 11 stocks gained for each that slid on the gauge. Equities advanced ahead of Federal Reserve Chairman Ben S. Bernanke’s testimony later today on the economic outlook to the U.S. Congress.

“Investors have enough reasons to believe that policy makers will act,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “U.S. officials sound a bit more dovish lately, and similarly in China. China may be getting close to easing. All of those things have led to a degree of confidence.”

The Topix is poised for its first weekly advance in 10 weeks on speculation stocks are oversold after the measure on June 4 closed at its lowest level since 1983. Short selling in Japan made up 27 percent of the total value of shares traded yesterday, down from 32 percent on May 30, according to the Tokyo Stock Exchange.

Cheap Valuations

The Topix fell 16 percent from this year’s high on March 27, erasing 50 trillion yen ($630 billion) in market value, amid concern the European crisis is deepening and as growth in China slows. Stocks on the measure are valued at 0.86 times book value, about the same level as in October 2008 amid the global financial crisis.

Futures on the Standard & Poor’s 500 Index (SPXL1) added 0.1 percent today after the index rallied 2.3 percent yesterday for its biggest gain this year.

European Central Bank President Mario Draghi yesterday said policy makers are ready to add more stimulus if needed, while Federal Reserve Vice Chairman Janet Yellen said the U.S. economy “remains vulnerable” and may warrant additional easing. Premier Wen Jiabao vowed last month to focus more on increasing growth in China, with the government saying yesterday it will delay tighter bank capital requirements to ensure lending support to bolster the economy.

Sony, Honda

Electronics companies, carmakers and banks accounted for about 45 percent of the Topix’s rally today amid reduced concern the European debt crisis will derail the global economy. Sony gained 2 percent to 1,072 yen. Honda Motor Co. (7267), Japan’s second- largest carmaker by market value, rose 2.1 percent to 2,537 yen. Mitsubishi UFJ Financial Group Inc. (8306), the nation’s biggest lender, advanced 2.9 percent to 355 yen.

Trading volume on the Nikkei was about the same as the 30- day average ahead of a quarterly settlement of futures and options contracts tomorrow, known as the major “special quotation.” The Nikkei 225 Volatility Index (VNKY) slid 4.2 percent to 25.50, indicating traders expect a swing of about 7 percent on the benchmark gauge over the next 30 days.

Energy shares rallied after crude for July delivery rose as much as 73 cents to $85.75 a barrel in electronic trading on the New York Mercantile Exchange. Inpex climbed 3.3 percent to 454,000 yen, while Japan Petroleum Exploration Co. rose 1.8 percent to 3,075 yen.

Ricoh advanced 4.1 percent to 591 yen after its investment rating was raised to “buy” from “hold” by Deutsche Bank, with a 12-month target price of 1,040 yen per share.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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