Japanese Stocks Advance as Investors Buy Defensive Shares

Japanese stocks rose, after yesterday falling the most in three weeks, as utilities and other defensive shares climbed amid concern recent global stimulus won’t be enough to buoy growth.

Electric Power Development (9513) Co. jumped 4.1 percent after SMBC Nikko Securities Inc. recommended buying the utility’s stock. Japan Tobacco (2914) Inc. rose 2.9 percent on optimism its pharmaceutical unit may develop an effective treatment for dialysis patients. Sharp Corp. (6753) soared 5 percent on a report the loss-making electronics company is in investment talks with Intel Corp.

The Nikkei 225 Stock Average (NKY) climbed 0.3 percent to 9,110.00 at the 3 p.m. close in Tokyo after yesterday closing down 1.6 percent, the most since Aug. 31. The gauge ended the week down 0.5 percent. The broader Topix (TPX) Index rose 0.3 percent to 756.38, with three shares rising for every two that fell.

“Investors are waiting to see whether all of this stimulus is going to have an impact on the economy itself,” said Ryota Sakagami, chief strategist at SMBC Nikko Securities in Tokyo. “If all we get is a market flooded with liquidity, we’ll see the yen continue to rise and gains in exporters erode.”

The Topix has advanced 5.2 percent since Sept. 6 after the European Central Bank started a global wave of easing, announcing unlimited bond purchases to curb the debt crisis. The Bank of Japan announced more asset purchases this week following the Federal Reserve adding a third round of quantitative easing.

Defensive Stocks

Defensive shares, including those of railways and food companies, have been some of the weakest performers among the Topix’s 33 industry groups since the ECB added stimulus this month. The gauge’s land transport index has risen 1.4 percent in the period, while food shares have gained 1.8 percent. In the same span, oil and coal producers surged 14 percent.

“When you get this much stimulus, stocks are going to rise, even in a bad global economy,” said Seiji Iwama, who manages about 45 billion yen at Daiwa SB Investments Ltd., a unit of Daiwa Securities Group Inc. in Tokyo. “Stocks sensitive to the global economy were bought for a few days, so today it’s defensives. That’s the cycle.”

Utilities gained the most among the Topix’s 33 industry groups today. Electric Power Development, also known as J-Power, jumped 4.1 percent to 1,981 yen. The shares rose after SMBC Nikko Securities boosted the company’s equity rating to outperform from neutral, citing lower risks at its Ohma nuclear plant, construction of which was halted after the Fukushima disaster.

Trade Minister Yukio Edano signaled he has no plans to stop construction of nuclear reactors that have already been approved, the Nikkei newspaper reported on Sept. 16. Chubu Electric Power Co. climbed 4.4 percent to 1,011 yen, while Kyushu Electric Power Co. soared 4.6 percent to 589 yen.

Japan Tobacco

Japan Tobacco rose 2.9 percent to 2,336 yen after unit Torii Pharmaceutical Co. produced positive results in a phase 3 study of its treatment for dialysis patients, raising optimism the drug will be approved in Japan, according to Keryx Biopharmaceuticals, Torii’s U.S. partner.

Sharp, Japan’s largest maker of liquid-crystal displays, gained the most on the Nikkei 225. The electronics company surged 5 percent to 212 yen after the Mainichi newspaper reported it may agree to at least 30 billion yen in investment from Intel, the world’s largest semiconductor producer.

Energy companies gained after crude oil for November delivery today gained in New York as investors speculated that the biggest weekly decline in more than three months was exaggerated.

Energy Shares

Inpex Corp., the nation’s biggest oil explorer, gained 2 percent to 488,500 yen. Japan Petroleum Exploration Co. climbed 1 percent to 3,195 yen.

The price of shares on the Topix stood at 0.9 times book value, compared with 2.3 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 the value of their assets.

Futures on the S&P 500 Index added 0.3 percent today. The gauge slid yesterday as more Americans than forecast filed unemployment claims and manufacturing in the Philadelphia region contracted for a fifth month.

-- Editors: Jim Powell, Jason Clenfield

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net; Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net

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

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