Japan’s Topix Rises to Eight-Year High as Earnings Spur Optimism

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Japanese stocks rose, with the Topix index closing at the highest level since July 2007, as positive earning results outweighed weaker-than-expected Chinese economic data.

Instant noodle-maker Nissin Foods Holdings Co. jumped 5.9 percent after profit surged. Textile makers led gains after a brokerage upgraded its outlook on Toray Industries Inc. Olympus Corp. added 2.4 percent after being tapped to join the JPX-Nikkei Index 400. Mabuchi Motor Co. sank 11 percent to lead declines among firms that rely on China for sales.

The Topix rose 0.7 percent to 1,691.29 at the close in Tokyo, reversing a loss of 0.5 percent. The Nikkei 225 Stock Average added 0.4 percent to 20,808.69. China at the weekend reported a bigger-than-expected slide in exports and the steepest slump in producer prices since 2009.

“Earnings at companies that rely on domestic demand or those in defensive sectors are showing resilience,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo. “Money is flowing in to consumpton-related shares, where earnings are being bolstered by tourist spending.”

More than 85 percent of companies in the Topix have announced earnings this quarter. Of the ones for which estimates are available, 63 percent have exceeded profit expectations, an improvement from the 48 percent that beat forecasts last quarter, according to data compiled by Bloomberg.

Japanese Earnings

Nissin Foods jumped 5.9 percent, the most in more than a year, after profit at the “Cup Noodle” brand-operator climbed 35 percent, beating analyst estimates.

Toray advanced 5.9 percent after Nomura Holdings Inc. raised its rating to buy from neutral a day after earnings at the textile-maker beat estimates. Nomura cited strength in materials for disposable diapers and airbags.

Olympus advanced 2.4 percent after the Tokyo Stock Exchange announced the endoscope-maker would join the JPX Nikkei 400 Index at the end of the month. Lixil Group Corp. slumped 5.1 percent after being removed from the gauge.

Mabuchi sank 11 percent after the firm’s guidance missed estimates. SMBC Nikko Securities Inc. said in a report that the maker of electronic motors was “particularly” sensitive to changes in Chinese conditions. The Asian region, not including Japan, accounted for 61 percent of sales last fiscal year.

“What’s worrying me the most is that even though equity indexes are at highs, shares of companies expanding business in emerging markets are beginning to turn lower,” said Resona’s Toda.

Chinese Exports

Shipments from China shrank 8.3 percent in July, more than five times the drop projected by analysts, stoking concern about growth in Asia’s largest economy. Imports declined 8.1 percent, compared with expectations for a 8 percent retreat, a weekend report showed. The producer-price index fell 5.4 percent, the biggest slide since October 2009.

“Chinese imports were weak as expected, but exports were worse than estimates, which is a surprise,” said Shoji Hirakawa, chief equity strategist at Okasan Securities Co. in Tokyo. “As the Chinese economy worsens, Japanese firms will be impacted in big and small ways.”

U.S. employers added 215,000 workers last month, slightly below economist estimates for a gain of 225,000, a government report showed on Friday. Average hourly earnings climbed a less-than-forecast 2.1 percent from a year earlier, indicating sluggish momentum in wage growth and weaker outlook for inflation.

Japanese data Monday showed the nation’s current account surplus in June was 558.6 billion yen compared with a 363.9 billion yen deficit last year. Economists had been expecting a surplus of 785.9 billion yen.

Futures on the Standard & Poor’s 500 Index added 0.3 percent after the underlying measure fell 0.3 percent on Friday. West Texas Intermediate crude traded at $43.66 a barrel after closing at $43.87 on Friday, the lowest closing price since March 17.

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