Japan Stocks Swing Between Gains, Losses After BOJ Tankan

Japan’s Topix (TPX) index rose for a third day, climbing above 800 for the first time since April, after the yen weakened to a nine-month low and a gauge of Chinese manufacturing beat estimates.

Komatsu Ltd., a maker of construction equipment that has benefited from China’s building boom, added 1 percent. Sharp Corp. jumped 7.6 percent after a loan provider said it may set limits on margin trades for the television maker’s shares. Hitachi Ltd. (6501), a maker of industrial machinery, dropped 2.1 percent after a central bank survey showed Japan’s biggest manufacturers were the most pessimistic in almost three years.

The Topix, a broad gauge of Japanese shares, gained 0.2 percent to close at 801.04 in Tokyo, its highest level since April 27. The measure has advanced 11 percent since Nov. 14, when the ruling party said it would call elections for this weekend, with bets an opposition party calling for more monetary easing will win.

“We can expect inflation, a weaker yen and a gain in stocks from the Japanese election,” said Michiya Tomita, a Hong Kong-based fund manager at Mitsubishi UFJ Asset Management Co., which oversees $70 billion. “China’s economy is showing signs of a recovery.”

The Nikkei 225 Stock Average slipped 0.1 percent to 9,737.56 today after a technical indicator signaled shares may be overbought. The gauge’s 14-day relative strength index, an indicator of trading momentum, rose to 75.7, its highest since March 19. Some traders view a reading above 70 as a signal shares may fall.

Annual Performance

Japan’s benchmark is headed for a 15 percent gain this year, its best annual performance since 2009, when the measure increased 19 percent. The Nikkei Stock Average Volatility Index rose 2 percent to 19.49 today, indicating traders expect a swing of about 5.6 percent on the benchmark gauge over the next 30 days.

Shares linked to China reversed earlier declines after a report showed manufacturing may expand in the country at a faster pace this month.

Komatsu, which gets about 14 percent of its sales from China, advanced 1 percent to 1,935 yen. Fanuc Corp., a maker of robots used in mainland factories, climbed 0.3 percent to 15,040 yen, reversing earlier declines of 1 percent.

A purchasing managers’ index released today in China by HSBC Holdings Plc and Markit Economics showed December’s preliminary reading was 50.9, compared with the 50.8 estimate from economists in a Bloomberg survey. November’s final reading was 50.5, the first time in 13 months it was above the expansion-contraction threshold of 50.

Yen Weakens

The yen fell to the weakest level since March against the dollar on bets that Shinzo Abe’s Liberal Democratic Party will win elections on Dec. 16. The LDP and a coalition partner are poised to win more than 300 of parliament’s 480 lower house seats, a Kyodo News poll showed yesterday. Abe has called on the Bank of Japan to provide “unlimited easing” and set an inflation target of at least 2 percent.

Honda Motor Co. (7267), which receives more than 80 percent of its sales from outside Japan, increased 0.2 percent to 2,829 yen. Canon Inc., the world’s biggest camera maker, rose 0.6 percent to 3,160 yen. Sony Corp., which receives 19 percent of its revenue from the U.S., advanced 2.3 percent to 906 yen.

Among other stocks that rose, Sharp jumped 7.6 percent to 269 yen. Japan Securities Finance Co., which provides loans for margin transactions, said it may set a limit for margin trades in Sharp.

The Tankan

Stocks dropped earlier after the Bank of Japan’s quarterly Tankan index for large manufacturers fell to minus 12 in December from minus 3 in September. The reading, the lowest since March 2010, compared with economists’ estimates for minus 10 in Bloomberg News survey. A negative number means pessimists outnumber optimists.

Hitachi fell 2.1 percent to 472 yen, the second-biggest decline on the Nikkei 225. Olympus Corp. (7733), a maker of endoscopes, lost 2.4 percent to 1,373 yen. Dainippon Screen Manufacturing Co., which manufacturers equipment used in producing semiconductors, sank 1.6 percent to 492 yen.

The Topix trades at 0.95 times book value, 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.

To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

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

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