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Japan Stock Futures Rise After Nikkei Enter Correction

Japanese stock-index futures rose following a report that the nation’s pension fund may boost its equities holdings, indicating the Topix index and Nikkei 225 Stock Average (NKY) will rebound after entering corrections yesterday.

American Depositary Receipts of Nissan Motor Co., Asia’s third-biggest auto market, gained 0.8 percent as the yen weakened. ADRs of Sony Corp. advanced 4.7 percent after people familiar with the matter said the electronics maker is working with Morgan Stanley and Citigroup Inc. as it considers adopting billionaire Daniel Loeb’s proposal for a sale of its entertainment unit.

Futures on Japan’s Nikkei 225 Stock Average expiring next month closed at 13,810 in Chicago yesterday, up from 13,610 at the close in Osaka, Japan. They were bid in the pre-market at 13,830 in Osaka at 8:05 a.m. local time. The underlying gauge closed 5.2 percent lower at 13,589.03 yesterday, entering a correction after sliding more than 10 percent from the May 22 high.

“The report suggests a more flexible approach is being considered, which could allow investment in domestic stocks to grow,” said Ioan Smith, a strategist at Knight Capital Europe Ltd. in London. “The fund’s overall allocation will not dip below the last reported level of 13 percent and must now be close to its 17 percent ceiling.”

Futures on Australia’s S&P/ASX 200 Index advanced 0.4 percent and New Zealand’s NZX 50 Index rose 0.5 percent. Futures on Hong Kong’s Hang Seng Index gained 0.3 percent and contracts on the Hang Seng China Enterprises Index of mainland Chinese companies trading in Hong Kong added 0.6 percent. The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. climbed 0.6 percent in New York yesterday.

Pension Fund

Japan’s $1 trillion Government Pension Investment Fund is considering changes that would allow a greater investment in shares, Reuters reported yesterday, citing unidentified people familiar with the matter. The shift would be the fund’s most significant revision in strategy since 2006, according to the news agency.

The pension fund is considering the first change to its asset balance amid concern government policies could erode the value of $747 billion in local bonds, President Takahiro Mitani said in a Feb. 1 interview with Bloomberg News.

Nikkei futures also advanced as a Japanese official said David Lipton, an IMF official, supports the government’s stimulus policies. The government official had been briefed on yesterday’s meeting in Tokyo between Lipton and Japan’s Deputy Prime Minister Taro Aso.

Offshore Investors

Japan’s Topix, which had risen as much as 83 percent from an almost 29-year low struck on June 4 last year, dropped 3.8 percent yesterday. The measure has retreated 11 percent from a five-year high on May 22, passing the 10 percent threshold some investors use to define a correction. Offshore investors sold a record 11.7 trillion yen ($116 billion) worth of Japanese shares in the week ended May 24, according to Tokyo Stock Exchange data.

The Nikkei 225 slumped 5.2 percent yesterday, also falling more than 10 percent from last week’s high, as Fast Retailing Co., which has a weighting of almost 10 percent on the benchmark index, tumbled by the most since March 2011. The 11 percent plunge by Asia’s biggest clothing retailer accounted for 23 percent of the Nikkei 225’s net decline yesterday.

Even after yesterday’s plunge, the Topix and the Nikkei 225 are still up more than 30 percent this year after the Bank of Japan pledged to reach 2 percent inflation within two years with unlimited bond buying and by doubling the monetary base.

Futures on the Standard & Poor’s 500 Index (SPX) slipped 01.1 percent. The gauge advanced 0.4 percent yesterday as weaker-than-expected data on economic growth and jobless claims boosted speculation the Federal Reserve will maintain stimulus.

The yen fell 0.2 percent to 100.91 per dollar as of 7:39 a.m. in Tokyo.

To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; Sarah Jones in London at sjones35@bloomberg.net;

To contact the editors responsible for this story: Nick Gentle at ngentle2@bloomberg.net; Andrew Rummer at arummer@bloomberg.net

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