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Japanese Shares Rebound From Biggest Drop in Two Months

Oct. 28 (Bloomberg) -- Japanese shares rose, with the Topix index rebounding from its biggest drop in more than two months, as a weaker yen boosted exporters and companies from Nippon Electric Glass Co. to Tokuyama Corp. jumped on earnings.

Panasonic Corp., a home-appliance manufacturer that gets almost half of its revenue abroad, increased 2.6 percent. Nippon Electric Glass, which makes fluorescent light tubes, climbed the most on the Nikkei 225 Stock Average after boosting its earnings outlook. Industrial-chemical maker Tokuyama leapt 5.3 percent as profit beat forecasts. Yahoo Japan Corp. lost 2.2 percent after its net-income forecast missed estimates.

The Topix added 1.7 percent to 1,198.36 at the close of trading in Tokyo, the most since Sept. 19, with all 33 industry groups gaining. The gauge sank 2.1 percent on Oct. 25, its steepest decline since Aug. 7. The Nikkei 225 increased 2.2 percent today to 14,396.04. Japan’s currency slid 0.2 percent to trade at 97.59 per dollar after two weeks of advances. Earnings season in Japan reaches its peak in the next two weeks.

“After shares fell last week, investors are looking to buy on dips,” said Hiroaki Hiwada, a strategist at Toyo Securities Co. in Tokyo. “Earnings are looking good and there’s a risk in not buying shares.”

The Topix has lost 0.4 percent this month, trailing all its 23 developed-market peers. Japanese shares are still the best performers this year among the markets amid optimism Prime Minister Shinzo Abe’s policies and unprecedented monetary easing from the Bank of Japan will lead the country out of deflation.

Futures on the Standard & Poor’s 500 Index rose 0.3 percent today. U.S. stocks completed a third straight week of gains Oct. 25, sending the S&P 500 to a record, as earnings beat estimates and weak economic data fueled speculation the Federal Reserve will put off reducing stimulus. Consumer confidence in the U.S. dropped to a 10-month low, a private report showed Oct. 25.

Stimulus Debate

A two-day meeting of the Federal Open Market Committee will start tomorrow after U.S payrolls rose less than projected last month and the 16-day government shutdown took at least $24 billion out of the economy. The Fed is likely to delay lowering its $85 billion in monthly bond purchases until March, according to a Bloomberg News survey of economists conducted Oct. 17-18.

“Now that the yen has stopped gaining, investor sentiment is recovering,” said Toshiyuki Kanayama, a senior market analyst at Monex Securities Inc. “Still, if the U.S. delays tapering, there’s going to be pressure on the dollar and the yen may strengthen, so the upside is limited.”

Japan’s currency slid against all of its 16 major counterparts today after Deputy Governor Kikuo Iwata reiterated the Bank of Japan’s commitment to monetary easing yesterday. The yen touched 97.79 per dollar today after rising to as much as 96.94 on Oct. 25. The Japanese currency fell 0.2 percent against the euro today to 134.69.

Exporters Climb

Panasonic gained 2.6 percent to 946 yen, while Canon Inc., the world’s biggest camera maker, advanced 2.3 percent to 3,150 yen. Toyota Motor Corp., the world’s biggest carmaker, added 1.8 percent to 6,310 yen.

More than 1,100 companies on the 1,744-member gauge report results in the two weeks through Nov. 7, the peak for earnings season, according to data compiled by Bloomberg. Earnings per share for companies on the measure are expected to increase 56 percent from the previous quarter, according to analyst estimates compiled by Bloomberg.

Of the 33 companies on the Topix that have already reported earnings this quarter and for which Bloomberg has estimates, 41 percent have posted profit that topped expectations.

“It’s still premature to make decisions on earnings as we’re still waiting for earnings season to really kick off,” said Monex’s Kanayama. “But we can see companies such as Hitachi and Murata Manufacturing are beating estimates.”

‘More Undervalued’

Hitachi Ltd., a maker of electronic equipment and nuclear-power systems, surged on Oct. 24 after preliminary profit of 32 billion yen ($328 million) was more than twice its 15 billion yen forecast. Murata Manufacturing Co., a supplier of electronic components that announces final earnings on Oct. 31, said net income for the first six months was probably 47 billion yen in a preliminary statement on Oct. 24, up 42 percent from its previous outlook.

“The recent sharp decline in Japanese equity prices makes Japanese stocks look more undervalued,” Nomura Holdings Inc. strategists led by Hiromichi Tamura wrote in a report dated Oct. 25. “We think fiscal year 2013 first-half results could act as an upside catalyst.”

Nippon Electric Glass jumped 6.2 percent to 496 yen today, its biggest gain since July 25. The company boosted its forecast for full-year net income to a range from 10 billion yen to 13 billion yen, from its previous 8 billion yen to 12 billion yen.

Tokuyama gained 5.3 percent to 398 yen, the second-biggest advance on the Nikkei 225. The company, which has surged 111 percent this year, posted a preliminary profit of 4.5 billion yen for the six months ended September, 80 percent higher than its previous forecast of 2.5 billion yen.

Mitsubishi Motors

Mitsubishi Motors Corp. climbed 4.2 percent to 1,079 yen after a Nikkei newspaper report the carmaker will buy back preferred shares issued to some group companies. The company isn’t the source of the report and is considering various steps to manage preferred stock, the automaker said in a statement.

Among stocks that fell, Yahoo Japan slid 2.2 percent to 490 yen. The company had forecast full-year net income of 121 billion yen when it announced half-year results on Oct. 25. Analysts surveyed by Bloomberg expected 131 billion yen.

The Topix traded at 1.25 times book value today, compared with 2.57 for the S&P 500 and 1.8 for the Stoxx Europe 600 Index Oct. 25. The Japanese gauge’s 30-day historic volatility was at 16.95 today, compared with its five-year median of 19.23. Volume on the Topix was 13 percent below the 30-day average.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net

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

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