Most Japanese Stocks Decline as Growth Misses Estimates

Most Japanese stocks fell as the nation’s economy expanded less than estimated. Trading volume on the Topix Index was at its lowest this year as the country started its weeklong summer festival.

Taiheiyo Cement Corp. (5233) sank 4.5 percent after posting operating profit that missed estimates. Daiwa House Industry Co., Japan’s biggest home builder, lost 3.9 percent after saying it will buy contractor Fujita Corp. Mitsui O.S.K. Lines Ltd. slid 3.5 percent after iron ore prices slumped to a 31-month low. Dai-Ichi Life Insurance Co. gained 1.2 percent after saying it will buy a stake in fund manager Janus Capital Group Inc.

“There is a tug-of-war in global markets between stimulus expectations and bad economic fundamentals,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has 33 trillion yen ($422 billion) in assets. “The GDP was much lower than expected, fueling negative sentiment. That’s also driving expectations the Bank of Japan may add monetary easing.”

The Nikkei 225 Stock Average (NKY) fell 0.1 percent to 8,885.15 at the 3 p.m. close in Tokyo after falling as much as 0.3 percent. The broader Topix was little changed at 746.95, with 1.1 billion shares trading hands, 42 percent less than this year’s daily average and the lowest since Dec. 30.

The nation’s gross domestic product grew an annualized 1.4 percent in the three months through June amid weaker exports and consumer spending, compared with a revised 5.5 percent expansion in the first quarter, the Cabinet Office said in Tokyo today. The median forecast of 24 economists surveyed by Bloomberg News was for 2.3 percent growth.

Growth Prospects

The Nikkei 225 advanced 4.9 percent last week, the largest weekly gain since Feb. 17, as lower than expected jobless claims in the U.S. boosted confidence and amid speculation China will do more to support growth as exports slow.

The price of shares on the Topix is 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.

Futures on the S&P 500 (SPXL1) slid 0.3 percent today. The gauge rose 0.2 percent on Aug. 10 after the San Francisco Chronicle reported that Fed Bank of San Francisco President John Williams said the lack of progress in reducing the unemployment rate and the slow economic recovery have convinced him it’s time to move ahead with another round of asset purchases.

Fed Easing

Only 29 of the Topix’s 1,672 companies are scheduled to release earnings during O-bon festival week. Of the 327 companies that have reported quarterly results since July 1, and for which Bloomberg has estimates, 47 percent have exceeded expectations.

“Many investors in Japan are on holiday, so it’s hard to make big moves this week,” Sumitomo Mitsui Trust Bank’s Sera said.

Taiheiyo Cement sank 4.5 percent to 171 yen, the most on the Nikkei 225, after posting an operating profit of 490 million yen ($6.3 million) for the three months ended June 30. That compared with a 1 billion yen estimate, according to analysts surveyed by Bloomberg.

Daiwa House lost 3.9 percent to 1,098 yen after saying it will buy Fujita, a Tokyo-based contractor with operations abroad, to boost overseas growth for 50 billion yen, 20 billion yen more than the company’s 29.4 billion yen in total assets as of March.

“The acquisition itself represents a valid growth strategy, but it is important to bear in mind that market participants rarely appreciate acquisitions that appear expensive,” Masahiro Mochizuki, a Tokyo-based analyst at Credit Suisse Group AG, said in a report published on Aug. 10.

Tanker Collision

Shipping lines declined the most among the Topix’s 33 industry groups. Mitsui O.S.K. dropped 3.5 percent to 223 yen after iron ore prices slumped to the lowest since December 2009 after purchases by China, the world’s biggest buyer, fell to the smallest in three months as slowing economic growth curbed demand.

The shipping line said one of its tankers is back in service after a collision yesterday with a U.S. Navy destroyer near the Strait of Hormuz in the Persian Gulf.

Insurers gained the most on the Topix. Dai-Ichi Life Insurance climbed 1.2 percent to 81,900 yen after saying it will buy as much as 20 percent of Denver-based Janus and plans to take a seat on the fund manager’s board of directors. The insurer will also invest $2 billion in Janus funds and help market them in Japan.

Tokyo-based insurer Tokio Marine Holdings Inc. jumped 3.8 percent to 1,904 yen after Deutsche Bank AG said first-quarter net income was 32 percent of the insurer’s full-year year goal. Tokio Marine said on Aug. 10 that net income fell 39 percent to 33.7 billion yen in the three months ended June 30, and expects 105 billion yen profit in the fiscal year.

-- With assistance Masaaki Iwamoto in Tokyo. Editor: 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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