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Japan Stocks Gain as Dividend Investors Temper Europe

Sept. 25 (Bloomberg) -- Japanese stocks advanced as investors bought shares ahead of deadline for dividend payments. Gains were limited on concerns that Europe isn’t making progress on resolving its sovereign debt crisis.

Nitto Denko Corp., one of more than 900 companies on the Topix Index that will trade without rights to a dividend from tomorrow, increased 3.3 percent. Suzuki Motor Corp. climbed 4.9 percent on a report an Indian unit may increase car prices. Ricoh Co., an office-equipment maker that obtains more than 20 percent of its revenue in Europe, sank 2.5 percent after German business confidence unexpectedly fell.

The Nikkei 225 Stock Average rose 0.3 percent to 9,091.54 at the 3 p.m. close in Tokyo, after falling as much as 0.5 percent earlier. Volume on the gauge was 12 percent above the 30-day average for the time of day. The broader Topix Index gained 0.5 percent to 757.66, with three shares advancing for each that fell.

“Today is the last day to have rights to receive dividends as of the end of September, so investors are inclined to buy shares after prices declined,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “What happens from now on is the deteriorating German confidence will spread to the real economy, and the euro region’s economy will contract.”

The Topix has fallen 13 percent from this year’s high on March 27. The decline drove the dividend yield for the gauge to 2.5 percent, more than three times the rate of the benchmark 10-year government bond. The Standard & Poor’s 500 Index yields just 1.16 times the government 10-year note, while Germany’s DAX offers 2.24 times and Australia’s S&P/ASX 200 pays 1.54 times.

Europe Impasse

Nitto Denko and Rinnai Corp. are among companies that will go ex-dividend tomorrow. Nitto Denko, which plans to pay a first-half dividend of 50 yen per share, jumped 3.3 percent to 3,785 yen. Rinnai Corp., a gas appliances maker that plans to pay an interim dividend of 30 yen, rose 3.5 percent to 5,930 yen.

Suzuki Motor gained the most on the Nikkei 225, rising 4.9 percent to 1,534 yen after Press Trust of India reported its unit Maruti Suzuki India Ltd. may raise car prices within a week to input higher costs and counter foreign exchange’s fluctuation.

Futures on the S&P 500 added 0.1 percent today. The measure yesterday fell a third day, its longest decline in seven weeks, as European leaders clashed on ways to stem the debt crisis and data from China and Germany signaled the slowdown is deepening.

Germany’s governing coalition is growing exasperated, with a senior ally of Chancellor Angela Merkel saying Spanish Prime Minister Mariano Rajoy must decide whether Spain needs a full rescue. The comments underscore Europe’s crisis-fighting stalemate amid discord over a banking union, Greece’s ongoing debate on how to meet bailout commitments and foot-dragging by Spain on possible aid.

German Confidence

Germany’s Ifo institute in Munich yesterday said its business climate index dropped for a fifth-straight month, clouding the outlook for exports to the region.

Ricoh sank 2.5 percent to 691 yen. Brother Industries Ltd. Ltd., a maker of office equipment that relies on Europe for 28 percent of its sales, slipped 1 percent to 778 yen.

The yen appreciated to as high as 100.30 today against the euro, compared with 101.02 at the close of stock trading yesterday in Tokyo. Against the dollar, Japan’s currency strengthened to 77.75 from 78.03. A stronger yen cuts overseas income at Japanese companies when converted into their home currency.

“The Bank of Japan eased monetary policies but that had no meaning as the yen strengthened, rather than weakened, as investors are buying the yen to avoid risks amid reigniting European debt issues,” SMBC Friend Securities’ Nakanishi said. “The European debt talks aren’t progressing as disagreements between Germany and France are seen,”

BOJ Stimulus

The Nikkei 225 retreated last week even after the central bank unexpectedly expanded its stimulus program to keep the rising yen from undermining a recovery. Central banks in the U.S. and Europe unveiled stimulus programs earlier this month.

The price of shares on the Topix stood at 0.9 times book value, compared with 2.3 times for the S&P 500 and 1.5 times for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than the value of their assets.

“Stocks markets right now are a caught in a tug-of-war between the stalemate in Europe and the prospect of monetary easing boosting shares,” said Seiji Iwama who manages about 45 billion yen at Daiwa SB Investments Ltd., a unit of Daiwa Securities Group Inc. in Tokyo. “The effects of the easing measures should emerge soon. Globally stocks will rise.”

Fanuc Corp. was the heaviest drag among the Nikkei 225, falling 3.4 percent to 13,000 yen after Nomura Holdings Inc. cut the investment rating to neutral from buy, “to reflect a slowdown in demand at Chinese machine tool manufacturers.”

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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