Japan Stocks Rise as Yen Weakens on China Manufacturing

Japanese shares rose, with the Nikkei 225 (NKY) Stock Average posting its first gain in four days, as the yen weakened after Chinese manufacturing data raised the earnings outlook for companies doing business there.

Toyota Motor Corp., the world’s biggest carmaker, led exporters higher after the yen fell against the dollar. Komatsu Ltd. (6301), a construction machinery maker that gets 14 percent of sales from China, gained 2.2 percent after a report said mainland manufacturing growth beat estimates. Ibiden Co. led declines by Apple Inc. (AAPL) suppliers after the iPhone maker reported the slowest sales growth since 2009.

The Nikkei 225 rose 1.3 percent to close at 10,620.87 in Tokyo. The broader Topix Index (TPX) gained 1.1 percent to 897.62, with all but two of its 33 industry groups rising. Shares extended gains after Japanese Deputy Economy Minister Yasutoshi Nishimura said the yen may weaken further.

“The China manufacturing data was fantastic and more confirmation that the Chinese economic recovery is on track,” said Shane Oliver, Sydney-based head of strategy at AMP Capital Investors Ltd., which has about $126 billion under management. “The question is whether that’s fully priced into stocks.”

The Topix has risen 24 percent since elections were announced on Nov. 14, last week capping its longest weekly winning streak since 1986 on optimism Prime Minister Shinzo Abe’s new government will take the necessary steps to fight deflation. The gauge is trading at 1.06 times book value, compared with 2.06 for the Standard & Poor’s 500 Index and 1.48 for the Stoxx Europe 600 Index.

China Manufacturing

In China, the preliminary reading of a Purchasing Managers’ Index was 51.9 in January, according to a statement from HSBC Holdings Plc and Markit Economics today, beating the 51.7 median estimate of 17 analysts surveyed by Bloomberg News. A reading above 50 indicates an expansion in manufacturing.

Komatsu rose 2.2 percent to 2,337 yen, while Hitachi Construction Machinery Co., which gets 17 percent of its sales from China, increased 1.9 percent to 1,899 yen.

Toyota and other exporters reversed declines as the yen weakened against the dollar following the release of the China manufacturing data.

Toyota gained 2.2 percent to 4,245, while Honda Motor Co. (7267), which gets about 80 percent of its revenue outside Japan, rose 2 percent to 3,350 yen. Sony Corp., the maker of Bravia televisions and PlayStation game consoles, rose 1.9 percent to 1,189 yen.

Yen Snaps Gains

Japan’s currency halted a three-day gain against the dollar and extended losses after Deputy Economy Minister Nishimura said the yen’s correction from strong levels “isn’t over yet.” A weaker yen boosts the outlook for overseas earnings at Japanese exporters when repatriated.

Futures on the Standard & Poor’s 500 Index fell 0.3 percent, while Nasdaq 100 Index futures lost 1.5 percent after Apple reported its slowest profit growth since 2003 and weakest sales increase in 14 quarters amid rising costs and accelerating competition with Samsung Electronics Co.

“There’s an impact on the supply chain for Apple but its offset by the benefits for competitors,” said AMP’s Oliver. “Apple captured the imagination of ordinary people. When the upside surprise slows down or isn’t as good as it used to be, the share price can start subsiding as investors look for alternatives.”

Apple suppliers in Japan fell, with Ibiden, which makes printed circuit boards, fell 4.7 percent to 1,248 yen. Nissha Printing Co., which makes touch input panels, lost 2.3 percent to 1,420 yen.

Utilities Led Declines

Utilities led declines among the Topix’s industry groups. Kansai Electric Power Co. dropped 4.4 percent to 836 yen after public broadcaster NHK cited Nuclear Regulation Authority Chairman Shunichi Tanaka as saying any nuclear reactors that fail to meet new safety standards must be shut. Kansai runs the nation’s only two operating reactors after the rest were powered down on safety concerns after the 2011 meltdowns.

Among other stocks that fell, Yaskawa Electric Corp. dropped 4.1 percent, the second-biggest decline on the Topix, after yesterday reporting operating profit that missed estimates. Small-precision motor maker Nidec Corp. also sank 0.8 percent to 5,270 yen after lowering its net income forecast by 91 percent.

The Nikkei Stock Average Volatility Index (VNKY) rose 5.5 percent to 21.34, indicating traders expect a swing of about 6.1 percent on the benchmark gauge over the next 30 days.

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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