Japan Stocks Rise for Third Day on Earnings Outlook

Japan’s Topix index rose for a third day as investors weighed the nation’s second-quarter output and corporate earnings amid low volume in the summer holiday period.

Kanto Denka Kogyo Co. and Fukuda Corp. each surged at least 13 percent after raising their full-year earnings forecasts. SoftBank Corp. was the biggest boost to the Topix (TPX), rising 2.4 percent after Alibaba Group Holding Ltd. was said to consider starting to market its initial public offering on Sept. 3. Dentsu Inc. (4324), Japan’s largest advertising agency, advanced 3.3 percent after its quarterly loss narrowed. Yamaya Corp. sank 5.1 percent after the liquor retailer said profit tumbled.

The Topix gained 0.4 percent to 1,262.13 at the close in Tokyo, with two shares rising for each that fell and volume 16 percent below the 30-day average. The Nikkei 225 Stock Average climbed 0.4 percent to 15,213.63. Shares advanced even after Japan’s economy contracted the most since the 2011 earthquake.

“A fall in GDP was already priced in,” said Hiroichi Nishi, an equities manager at SMBC Nikko Securities Inc. “Many market participants are on summer vacation, and with earnings season coming to a close, the market is lacking energy due to a lack of catalysts.”

GDP shrank an annualized 6.8 percent in the three months through June as consumption and investment plunged after the government increased sales tax in April, figures released by Cabinet Office today showed. That was less than the median estimate of 37 economists surveyed by Bloomberg News for a 7 percent drop.

Earnings Performance

Investors weighed earnings as first-quarter reporting season draws to a close. Of the companies that posted quarterly results since the beginning of July and for which estimates are available, 58 percent surpassed analyst expectations for profit, according to data compiled by Bloomberg.

Kanto Denka surged 14 percent to 294 yen after the chemical maker raised its full-year profit forecast by 67 percent. Fukuda, a general contractor, jumped 13 percent to 695 yen after lifting its annual net-income forecast by 61 percent.

Pacific Metals Co. gained 1.6 percent to 381 yen after the ferronickel and stainless-steel maker said its first-quarter profit quadrupled compared with the previous year.

Mixi Inc. (2121) rose 2.6 percent to 6,270 yen, extending its three-day advance to 42 percent after surging by its daily limit the previous two days. Mitsubishi UFJ Morgan Stanley Securities Co. tripled its share-price target on the social-network operator to 7,500 yen.

SoftBank jumped 2.4 percent to 6,794 yen. Alibaba, in which SoftBank has a stake of more than 30 percent, is weighing a plan to start marketing the share sale to investors on Sept. 3, with management traveling across Asia, Europe and the U.S. before an initial public offering in the middle of the month, people with knowledge of the matter said.

Yamaya Drops

Among shares that fell, Yamaya slipped 5.1 percent to 1,709 yen after reporting a 70 percent decline in first-quarter net income to 148 million yen ($1.45 million).

Futures on the Standard & Poor’s 500 Index added 0.3 percent. The underlying equity gauge decreased 0.2 percent yesterday, as energy shares sank after Brent crude fell to a 13-month low.

Data from Germany reignited geopolitical concern, after investor confidence reported by the ZEW Center fell for an eighth month as the Ukraine crisis and a sluggish euro-area recovery damped the outlook for Europe’s largest economy.

A convoy Russia says is loaded with humanitarian assistance for rebel-held areas of Ukraine headed for the border, as the government in Kiev set conditions for letting the aid in and the Red Cross demanded more details. Ukraine expressed fears the convoy is carrying military equipment to aid the pro-Russia separatists.

The Topix traded at 1.2 times book value today, compared with 2.6 for the S&P 500 and 1.8 percent for the Stoxx 600 yesterday.

To contact the reporters on this story: Cheng Leng in Tokyo at cleng3@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net Tom Redmond

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