Nomura Holdings Inc. (8604), Japan’s biggest brokerage, climbed to the highest level since November 2008 as securities firms rallied on expectations that they will continue to profit from the country’s stock market rebound.
Shares of Nomura surged 9.6 percent, the most in a month, to 934 yen at the close of trading in Tokyo. Daiwa Securities Group Inc. (8601) rose 8.3 percent to 1,002 yen, the highest since July 2008. The Topix Index (TPX) advanced 1.8 percent.
Securities firms have benefited the most from the Topix’s 71 percent gain over the past six months as the increase in trading boosts brokerage and stock underwriting income. The yen has weakened amid the Bank of Japan’s unprecedented monetary stimulus and today reached the lowest since October 2008 after Group of Seven officials signaled tolerance for its decline.
“Investors are buying Japanese brokerages’ shares in anticipation that their revenue will expand as securities trading continues to rise and the yen weakens after the G-7 meeting,” said Takehito Yamanaka, a Tokyo-based analyst at Credit Suisse Group AG, who rates Nomura outperform. “We’re seeing a second wave of investors who hadn’t bought Japanese financial stocks earlier.”
The Topix Securities and Commodity Futures Index was today’s best performer on the benchmark, followed by gauges for banks, other financial businesses and insurers.
Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest bank, jumped 8.2 percent to 728 yen, taking its market capitalization to 10 trillion yen ($98 billion). Sumitomo Mitsui Financial Group Inc. (8316), the country’s second-biggest lender by market value, climbed 5.6 percent, and Mizuho Financial Group Inc. (8411), the third biggest, advanced 5.1 percent.
The three so-called megabanks all have investment banking units, which, together with Nomura and Daiwa, posted a 22 percent increase in aggregate net operating revenue in the year ended March, helped by monetary easing and Prime Minister Shinzo Abe’s growth strategy, according to Fitch Ratings Ltd.
Nomura and closest domestic rival Daiwa, both based in Tokyo, reported their highest quarterly profit in seven years as the stock-market rebound spurred brokerage commissions and underwriting fees. Daiwa’s net income quadrupled for the three months ended March from a year earlier to 48.8 billion yen, it said on May 1. Nomura’s profit more than tripled to 82.4 billion yen, the company said on April 26.
The resurgence may not be sustained, Fitch said in a May 9 statement. “Ultimately, top-line profitability is still susceptible to investor confidence, which may fade if the government’s policy fails to stimulate real and lasting economic growth,” it said.
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