Japan Shares Climb to Two-Month High on Earnings Optimism

Japanese shares rose, with the Topix (TPX) index closing at its highest level in almost two months, on optimism about earnings in Japan and the U.S. Profits at Topix companies are projected to almost double this quarter.

Best Denki Co. (8175) jumped 14 percent after the electronics retailer’s net income surged. Fuji Heavy Industries Ltd. advanced 1.7 percent on a report the maker of Subaru cars may post record quarterly operating profit. Nintendo Co. traded 5.6 percent higher in Tokyo after the gaming-console producer’s main listing was transferred from Osaka as part of the merger between Japan’s two largest bourses.

The Topix gained 0.7 percent to 1,210.54 at the close of trading in Tokyo, with volume 17 percent below the 30-day average. The gauge closed at its highest level since May 22. The Nikkei 225 Stock Average rose for a third day, adding 0.6 percent to 14,599.12.

“Earnings across the board are likely to be strong,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees the equivalent of $4.8 billion. “While the market has priced in a lot of it, I don’t think it has factored in the full potential for positive earnings yet because investors are still in wait-and-see mode. But the overall trend is for stocks to keep rising.”

After plunging as much as 18 percent from a May 22 high, the Topix has rebounded amid optimism Prime Minister Shinzo Abe will push through economic reforms following elections on July 21. The gauge added 14 percent in the past four weeks, the most since April 2009.

Earnings Jump

Earnings at Topix companies will surge 92 percent to 22.38 yen per share, compared with 11.67 yen per share last quarter, according to analyst estimates compiled by Bloomberg. Earnings are projected to grow 56 percent for the year, the data show. Quarterly profits on the Standard & Poor’s 500 Index are expected to rise 6 percent, according to Bloomberg data.

Best Denki, which gets 87 percent of its revenue from Japan and the rest from Asia, surged 14 percent to 208 yen, the biggest advance in three months. The stock earlier rose by the most since its listing in 1982. The retailer reported a 23-fold increase in net profit to 542 million yen. Yamada Denki Co., its controlling shareholder, slipped 2.1 percent.

Fuji Heavy, which counts North America as its biggest market for sales, jumped 1.7 percent to 2,741 yen, its highest level ever. The vehicle and industrial-machinery maker may post record operating profit of about 70 billion yen for the quarter ended June 30, buoyed by increased U.S. sales, the Nikkei newspaper reported on July 13.

Citigroup Beats

Futures on the S&P 500 added 0.1 percent today. The index gained 0.1 percent yesterday to close at a record high after earnings of Citigroup Inc., the third-biggest U.S. bank by assets, beat estimates.

“Good corporate earnings in the U.S. are improving investor sentiment because expectations weren’t that high to begin with,” said Toshihiko Matsuno, a strategist at Tokyo-based SMBC Friend Securities Co., a unit of Japan’s second-biggest lender by market value. “The yen weakened past 100 again, boosting optimism about earnings.”

The yen touched 100.07 per dollar today, compared with 99.22 on July 12. It has fallen about 20 percent against the greenback since mid-November, solidifying its place as the worst-performing major currency. A weaker yen boosts the value of Japanese exporters’ overseas earnings when repatriated.

Among other shares that rose, Tokyo Electric Power Co. surged 13 percent to 768 yen, the biggest increase on the Nikkei 225. The utility, also known as Tepco, has more than tripled this year amid increased optimism the government will allow restarts of nuclear power plants shuttered after the 2011 earthquake and nuclear meltdown.

Surging Buybacks

Topix companies bought 1.78 trillion yen ($17.8 billion) of their own shares in the six months to June, the most since 2005, as they sought to spend some of their record 115 trillion yen in cash, according to data compiled by Bloomberg. Buybacks may double to 3.8 trillion yen this fiscal year, Goldman Sachs Group Inc. said in an April 24 report.

The Tokyo Stock Exchange became the world’s third-biggest bourse by listed companies today, adding 1,100 stocks from the Osaka Securities Exchange as the two bourses merged their cash-equity trading platforms. The TSE now has 3,423 companies. TSE first-section stocks increased by 38 to 1,760.

Nintendo closed at 12,720 yen today in Tokyo, 5.6 percent higher than its last price on July 12 in Osaka and its highest level since March 2012. The Kyoto, western Japan-based company has started offering free software to help develop games for its WiiU console, the Sankei newspaper said on July 15.

Tokyo Arrivals

Murata Manufacturing Co. (6981), an electronic-component maker that also changed its main market, closed at 7,540 yen in Tokyo today, 3.3 percent lower than its 7,800 yen close in Osaka on July 12. Nidec Corp., a small precision-motor maker that also moved to the TSE today, closed at 7260 yen in Tokyo, up 2.7 percent from its July 12 closing price of 7,070 yen in Osaka.

Among stocks that fell, KLab Inc. plunged 22 percent to 1,259 yen, the biggest loss on the Topix and the online video-game producer’s largest drop since listing in September 2011. The company posted a net loss of 770 million yen for the nine months ended May.

The Topix traded at 1.28 times book value on July 12, compared with 2.48 for the S&P 500 yesterday and 1.68 for the Stoxx Europe 600 Index. The Topix’s 30-day historic volatility was at 32.35 today, retreating from its July 2 high of 43.22.

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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