Japan's Topix Posts Biggest Gain in Four Months, Halting Rout

  • S&P 500 rises for second day as global markets halt rout
  • Topix data pointed to rebound as shares fell too far, too fast

Japanese stocks rose for the first time this year, with the Topix index posting its biggest gain in four months, as investors decided that a China-fueled global rout had gone too far.

The Topix surged 2.9 percent to 1,442.09 at the close in Tokyo, its biggest jump since Sept. 9, after Tuesday capping the worst start to a year on record. The Nikkei 225 Stock Average gained 2.9 percent to 17,715.63. The yen lost 0.5 percent to trade at 118.28 per dollar.

“It’s a relief,” Chihiro Ohta, general manager of investment information at SMBC Nikko Securities Inc. in Tokyo, said by phone. “We’ve fallen six days in a row, and we’re seeing signals flashing that Japanese stocks are falling too quickly. We’re at a level where we can expect a technical rebound.”

The Topix’s 14-day relative strength index fell to 24.4 on Tuesday, below the level of 30 that some traders say indicates shares will rise. The stock index lost 9.4 percent in the first six days of the year.

Tire makers, brokerages and airlines led gains among the 33 Topix industry groups. Electronic component makers TDK Corp. jumped 5.5 percent, Murata Manufacturing Co. added 3.8 percent and Nidec Corp. surged 4.2 percent after Credit Suisse Group AG boosted its target share price on the stocks.

Oriental Land Co., which operates the Tokyo Disney Resort, added 4.9 percent after the Nikkei newspaper said its operating profit will recover. Nintendo Co. advanced 6.5 percent on high expectations ahead of a new smartphone game release, analyst Hideki Yasuda at Ace Research Institute told Bloomberg.

Crude Drop

Airlines jumped after crude prices dropped on Tuesday. Japan Airlines Co. added 5 percent. West Texas Intermediate futures settled at $30.44 a barrel on Tuesday after slipping to as low as $29.93. They gained 0.9 percent on Wednesday.

Global equity markets have been rocked in 2016 as concern over China’s management of its economic slowdown sours sentiment and damps demand for riskier assets. China on Tuesday kept the yuan’s reference rate stable for the third day in a row, seeking to reassure markets spooked by last week’s run of weaker fixings. 

The yuan solidified its gains in offshore trading after officials defended the currency, bringing a semblance of stability to markets worldwide. Global stocks eked out their first one-day gain of the year after shedding more than $5 trillion in value since the start of 2016.

Data Wednesday showed China’s exports unexpectedly rose in December, while a slump in imports moderated, suggesting a weakening currency may be starting to boost competitiveness in the world’s biggest trading nation.

E-mini futures on the Standard & Poor’s 500 Index rose 0.9 percent after the underlying measure added 0.8 percent on Tuesday, extending a two-day rally following a late-afternoon rebound.

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