Japan Stocks After Goldman Says Election May Help Shares
Japan stocks rose, with the Nikkei 225 (NKY) Stock Average rebounding from yesterday’s loss, after Goldman Sachs Group Inc. said shares will benefit from policy changes if the opposition wins next month’s election.
Honda Motor Co. (7267), which gets 44 percent of its revenue in North America, rose 2 percent on optimism for a budget agreement in the U.S. to avoid the so-called fiscal cliff. Shikoku Electric Power Co. paced gains among utilities on expectations it will seek a 10 percent rate increase. All Nippon Airways Co. climbed 4.1 percent on a report the carrier will gain eight new berths at Tokyo’s Haneda airport. Sharp Corp. (6753) gained 3.1 percent on a Wall Street Journal report the electronics maker is in talks with Dell Inc. for $240 million in capital investment.
The Nikkei 225 gained 1 percent to close at 9,400.88 in Tokyo after yesterday falling 1.2 percent, the biggest decline in three weeks. The broader Topix Index climbed 1 percent to 779.44, with more than two stocks advancing for each that fell.
“Investors are hoping the election will diminish frustration with politics following confusion in the wake of the earthquake,” said Koji Toda, chief fund manager at Tokyo-based Resona Bank Ltd., which oversees about 15 trillion yen ($183 billion). “People are buying Japanese shares because prices are too low, even with the economy in a rut.”
The Topix advanced 7.9 percent from Nov. 14, when Prime Minister Yoshihiko Noda called for elections next month, causing the yen to drop on speculation the opposition Liberal Democratic Party will win and call for more monetary easing.
The Topix will reach 930 within a year, Goldman strategists led by Kathy Matsui wrote in a report dated today, saying Japanese companies will have a 20 percent profit increase in the fiscal year starting in April.
If the LDP takes power as polls suggest, “we would expect policies aimed at combating deflation, including public works investment, possible corporate tax cuts and a re-think of the nuclear phase-out plan,” Matsui wrote in the note. LDP leader Shinzo Abe reiterated calls today for unlimited monetary easing until inflation reaches 2 percent.
The Topix traded at 0.9 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.5 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.
Futures on the S&P 500 rose 0.3 percent today. The index rose 0.8 percent yesterday after Republican House Speaker John Boehner told reporters he is optimistic budget talks can avert the fiscal cliff of automatic tax increases and spending cuts next year that could spur a global recession.
Companies linked to the U.S. gained, with Honda adding 2 percent to 2,726 yen. Canon Inc. (7751), a camera maker that gets 31 percent of its revenue in the Americas, rose 1.1 percent to 2,849 yen.
Shikoku Electric added 2 percent to 1,100 yen after the Nikkei reported the utility will request a 10 percent household rate increase. Chubu Electric Power Co. gained 3.5 percent to 1,100 yen, while Chugoku Electric Power Co. rose 3.5 percent to 1,198 yen.
Airlines gained after Kyodo News reported ANA will get eight new slots at Haneda airport while Japan Airlines Co. will add three. ANA rose 4.1 percent to 178 yen. JAL climbed 0.9 percent to 3,750 yen.
Sharp added 3.1 percent to 169 yen after the Wall Street Journal reported the loss-making electronics company in talks for as much as $240 million in investment from Dell. Sharp has had its ratings cut to junk and is the world’s worst-performing major stock this year.
Nakayama Steel Works Ltd. (5408) surged 55 percent to 62 yen after falling as much as 13 percent. It’s in talks with at least five banks led by Mitsubishi UFJ Financial Group Inc. to waive 60 billion yen of loans after three years of losses, bank officials with knowledge of the talks said.
The Nikkei Stock Average Volatility Index (VNKY) dropped 1.8 percent to 17.36, indicating traders expect a swing of about 5 percent on the benchmark gauge over the next 30 days. Trading volume on the Nikkei 225 was 12 percent below the 30-day average.
Toyota Motor Corp. (7203) led declines in China production among Japanese automakers in October after a dispute over East China Sea islets led to violent demonstrations in China and a boycott of Japanese products. Toyota added 1.2 percent to 3,515 yen even after its output in China fell 61 percent.
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