Japanese stocks extended a three-day rally after China’s inflation slowed a fourth month, widening the scope for easing in Japan’s biggest export market amid growing expectations for additional global monetary stimulus.
Fanuc Corp. (6954), a maker of robotics used in Chinese factories, added 1.8 percent. Dowa Holdings Co. (5714) soared 10 percent after the metal smelter lifted its first-half earnings forecast. Oki Electric Industry Co. (6703) plunged 34 percent, the most since at least 1974, after it was put on notice for possible delisting on reports of improper accounting at its Spanish unit.
“China’s slowing inflation will make it easier for the country to relax policy, which will have a good impact on exporters to China,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd., which oversees the equivalent of $68 billion. “Investors have expectations for stimulus globally. Such expectations bolster markets, and the economy will accelerate.”
The Nikkei 225 Stock Average (NKY) rose 1.1 percent to 8,978.60 at the 3 p.m. close in Tokyo, the highest since July 6. Volume on the gauge was 26 percent above the 30-day average ahead of the August futures settlement tomorrow, known as the “special quotation.” The broader Topix (TPX) Index rose 0.8 percent to 751.84, with almost three shares advancing for each that fell.
China’s consumer prices slowed to 1.8 percent in July from a year earlier, the lowest since January 2010, the National Bureau of Statistics said today. The inflation compares with the 1.7 percent estimate in a Bloomberg survey of 33 analysts and a 2.2 percent gain the month before. A commentary yesterday in China’s Financial News said moderating price gains offer more room for stimulus.
Exporters on the Nikkei 225, which get 27 percent of their revenue abroad on average, advanced after the inflation report. Fanuc gained 1.8 percent to 12,570 yen. TDK Corp., a manufacturer of electronic parts that gets almost 30 percent of its revenue from China, climbed 1.7 percent to 3,380 yen.
The Topix has rebounded 8.1 percent since this year’s low on June 4 as central banks around the world ease policy to support growth. The price of shares on the gauge stood at 0.9 times book value, compared with 2.2 times for the Standard & Poor’s 500 Index and 1.5 times for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than value of their assets.
Shares extended gains even after the Bank of Japan refrained from expanding stimulus. Japan’s central bank kept its asset-purchase fund at 45 trillion yen ($573 billion) and lending facility at 25 trillion yen, according to a statement released in Tokyo today. All 22 analysts surveyed by Bloomberg News predicted no change. The nation’s key rate was held near zero.
Futures on the S&P 500 (SPXL1) added 0.3 percent today. The gauge added 0.1 percent yesterday after falling as much as 0.4 percent after Federal Reserve Bank of Dallas President Richard Fisher signaled opposition to more stimulus. Adequate measures are already in in place and global central banks may not have capacity to further easing policy, he said.
“There’s expectations policy makers may add stimulus globally, allowing investors to hope the economy will rebound,” said Tomomi Yamashita, a senior fund manager at Shinkin Asset Management Co. in Tokyo, which oversees $6.6 billion. “Japan’s domestic demand is good, bolstered by firm consumption, while external demand is bad due to the stronger yen.”
A third of the Topix’s 1,672 companies are scheduled to release earnings this week. Of the 301 companies that have reported since July 1 that have issued forecasts, 49 percent have exceeded expectations, according to Bloomberg data.
Dowa Holdings surged 10 percent to 551 yen, the most on the Nikkei 225, after boosting its first-half net income forecast 40 percent to 7 billion yen ($89.2 million), citing demand used in car and chip related products.
Oki Electric declined the most on the Nikkei 225, falling 34 percent to 81 yen, after the maker of automated teller machines was put on a watchlist for possible delisting after its Spanish unit overstated accounts. Oki was the Nikkei 225’s strongest-performing stock this year through yesterday, surging 77 percent.
Nikon Corp. (7731), which gets 25 percent of its revenue from Europe, plunged 8.1 percent to 2,086 yen after the camera maker cut its profit outlook, citing the strong yen against the euro.
-- With assistance from Toshiro Hasegawa in Tokyo. Editor: Jim Powell
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