Topix Hits Highest Since Quake on Japan Earnings Optimism

Japanese shares gained, with the Topix Index closing at its highest level since the 2011 earthquake, on optimism about corporate earnings.

Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, increased 4.4 percent after the Nikkei newspaper said the lender’s net profit may reach a record. KDDI Corp. rose 2.8 percent after the mobile operator raised its operating-profit forecast and announced a stock split. Sony Corp., the maker of the PlayStation 3, dropped 1.6 percent after the Oriental Morning Post said China’s culture ministry denied a report it will lift a ban on game consoles.

The Topix, the country’s broadest equity measure, climbed 0.8 percent to 920.76 in Tokyo, its highest close since March 10, 2011, the day before a record earthquake triggered a tsunami and the worst nuclear crisis in 25 years. The Nikkei 225 Stock Average added 0.4 percent to 10,866.72.

“As investor sentiment is generally positive, they are quick to buy on good news, such as earnings,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees about 498 billion yen $5.5 billion. “The market is likely to keep following the movements of the yen, and there may be some investors who are looking to take profits.”

The Topix rose 26 percent from Nov. 14, when elections were announced, through yesterday on optimism Prime Minister Shinzo Abe’s new government will take the necessary steps to fight deflation. The gauge is trading at 1.08 times book value, compared with 2.07 for the Standard & Poor’s 500 Index and 1.5 for the Stoxx Europe 600 Index.

Lenders Surge

Banks provided the biggest support to the Topix. Sumitomo Mitsui Financial jumped 4.4 percent to 3,450 yen, its highest close since Oct. 2009. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, gained 3.8 percent to 497 yen. Mizuho Financial Group Inc., the third-largest bank, advanced 2.9 percent to 175 yen.

Sumitomo Mitsui Financial and Mitsubishi UFJ Financial are each likely to report more than 500 billion yen in nine-month net income, the Nikkei reported, citing the rising value of the lenders’ stock holdings. Mizuho Financial may report profit of 400 billion yen, the report said, without saying where it got the information.

Goldman Sachs raised its outlook for financial shares, saying they will rise an average 16 percent in the next 12 months as earnings are lifted by a weaker yen and gains by equity holdings, analysts Katsunori Tanaka and Taichi Noda wrote in a report today. They named Sumitomo Mitsui as their top pick among the banks, while reiterating their attractive rating on the three-biggest Japanese lenders.

KDDI Lifts Forecast

KDDI rose 2.8 percent to 6,530 yen, its highest close since August 2008. The mobile operator increased its operating profit forecast to 505 billion yen and said it would conduct a 2-for-1 stock split on April 1.

Among shares that fell, Sony dropped 1.6 percent to 1,385, paring yesterday’s 9.1 percent surge. Nintendo Co., the maker of the Wii console, lost 0.5 percent after gaining 3.4 percent yesterday.

China’s culture ministry denied a China Daily report yesterday that the country would lift a 12-year ban on the sale of video-game consoles, according to the Oriental Morning Post which cited an unidentified person from the ministry.

Futures on the S&P 500 climbed 0.2 percent today. The measure slid 0.2 percent yesterday as a decline in pending home sales outweighed a gain in durable-goods orders. The gauge closed at its highest level since October 2007 on Jan. 25 after capping its longest daily win streak since 2004.

Volume on the Nikkei 225 was about 11 percent above its 30-day average for the time of day. The Nikkei Stock Average Volatility Index fell 4.7 percent to 22.70, indicating traders expect a swing of about 6.5 percent on the benchmark gauge over the next 30 days.

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