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Japan Stocks Swing From Gains, Losses on China Prospects

Japanese stocks rose on optimism China will encourage domestic demand and spend more to expand cities. Shares fell earlier after U.S. President Barack Obama held firm on calling for higher taxes on top earners in budget negotiations to avert the so-called fiscal cliff.

Fanuc Corp., a maker of robotics used in Chinese factories, advanced 0.7 percent. Fast Retailing Co., Asia’s biggest apparel seller, advanced 3 percent after domestic sales at its Uniqlo chain jumped. Sharp (6753) Corp. advanced 4 percent after the television maker said it plans to raise 9.9 billion yen ($121 million) selling shares to Qualcomm Inc. Honda Motor Co. (7267) fell 0.7 percent after sales in China declined last month.

The Nikkei 225 Stock Average (NKY) climbed 0.4 percent to 9,468.84 at the 3 p.m. close of trading in Tokyo after falling as much as 0.6 percent. The equity gauge capped the biggest monthly gain since February last month on speculation Japan’s opposition will win the Dec. 16 election and call for more stimulus. The broader Topix Index was little changed at 781.86, without about three stocks rising for every two that fell.

China has been showing that “we can expect a bottoming out of the economy and a recovery,” said Shintaro Shinohara, who helps oversee about 11 trillion yen as the head of equity investment at Prudential Investment Management Japan Co. “The U.S. fiscal cliff is an important problem but it’s not shocking. They will probably compromise during their talks. However right now, the negotiations have stalled and some investors feel they can’t be positive about the outlook.”

Stock Valuations

The Topix traded at 0.9 times book value today, compared with 2.1 for the Standard & Poor’s 500 Index and 1.5 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.

Shares linked to China rose on a Xinhua News Agency report yesterday that the nation will expand domestic demand and actively promote urbanization to encourage more people to move to cities. The government will also focus on simplifying property taxes, the report said, according to a China National Radio yesterday citing Liu Heng, a scholar with the Central University of Finance and Economics.

Fanuc rose 0.7 percent to 13,990 yen. Komatsu Ltd. (6301), which gets 14 percent of its sales from China, gained 0.7 percent to 1,856 yen.

Fast Retailing, Sharp

Among other shares that rose, Fast Retailing advanced 3 percent to 19,250 yen. Same-store sales at its Uniqlo stores in Japan jumped 14 percent in November as colder weather drives demand, the company said.

Sharp advanced 3.5 percent to 180 yen, its highest since Oct. 4. The loss-making company said it will sell 30.12 million shares at 164 yen each to San Diego-based Qualcomm this month for a 2.6 percent stake, and may sell an additional 4.94 billion yen of stock if certain conditions are met.

Futures on the S&P 500 climbed 0.5 percent today. The index lost 0.2 percent yesterday as President Barack Obama said in a Bloomberg Television interview that the Republican offer on resolving the fiscal cliff won’t raise the revenue needed to shrink the deficit by $4 trillion over the next decade.

The president said he’s willing to make further cuts in entitlements while insisting Republicans accept higher tax rates for top earners if the U.S. is to avoid $600 billion of automatic spending cuts and tax increases at the start of 2013.

‘About Politics’

“It’s all about politics,” said Masahiko Ejiri, a Tokyo- based fund manager for Mizuho Asset Management Co. “Investors are adjusting their positions after stocks rose a bit too much recently. With the U.S. fiscal cliff issue, investors are having to buy and sell without really knowing how it’s going to pan out.”

The Nikkei Stock Average Volatility Index (VNKY) gained 0.8 percent to 17.47 today, indicating traders expect a swing of about 5 percent on the benchmark gauge over the next 30 days.

Automakers declined. Honda lost 0.7 percent to 2,705 yen after its China auto sales slumped about 30 percent last month. Toyota Motor Corp. fell 0.3 percent to 3,500 yen on a report one of its Scion coupes crashed into a road barrier on a highway to Shanghai last month after the cruise control failed to disengage, according to a Dragon Television.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net

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

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