Japan’s Topix Posts Biggest Advance in Week on China, Fed

Japan’s Topix index climbed after preliminary China manufacturing data beat estimates and Federal Reserve minutes showed policy makers see little risk continued stimulus will spur faster inflation.

Daikin Industries Ltd., an air-conditioner maker that gets 18 percent of sales from China, added 2.9 percent. Nissan Motor Co., a carmaker that counts on North America for 41 percent of its revenue, added 1.3 percent. Non-bank lender Acom Co. gained 3.9 percent after a report the ruling political party is discussing relaxing rules on consumer-finance companies. Sanrio Co., the creator of Hello Kitty toys, posted its biggest drop since 1995 after a strategy briefing yesterday disappointed investors.

The Topix gained 1.7 percent to 1,169.34 at the close in Tokyo, its largest advance since May 13. All but two of 33 subsectors climbed, with volume about 25 percent above the 30-day average. The Nikkei 225 Stock Average increased 2.1 percent to 14,337.79. The yen slid 0.3 percent to 101.67 per dollar.

“The China report is a positive surprise, especially after a series of negative data recently,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd. “There was a big uncertainty over China up to yesterday, but today’s data raises hopes that things will get better.”

A preliminary purchasing managers’ index from HSBC Holdings Plc and Markit Economics climbed to 49.7, exceeding the 48.3 median estimate of analysts surveyed by Bloomberg News and a final reading of 48.1 in April. Although better than expected, the reading below 50 signals a fifth month of contraction in factory activity.

Japan Post

Japan Post Insurance Co., which manages about $846 billion in assets, plans to increase investment in domestic stocks by as much as 350 billion yen ($3.4 billion) this fiscal year, Reuters reported, citing an unnamed person it said had knowledge of the investment strategy. Japan Post also plans to boost overseas bond holdings by the equivalent of $6.4 billion, Reuters said, citing a document published by a government panel.

Futures on the Standard & Poor’s 500 Index gained 0.2 percent. The equity measure jumped 0.8 percent yesterday. With inflation expected to remain well below the central bank’s 2 percent goal, the Federal Open Market Committee doesn’t “face a trade-off between its employment and inflation objectives, and an expansion of aggregate demand would result in further progress relative to both objectives,” according to minutes of its April 29-30 meeting released yesterday.

“The Fed minutes were in line with expectations,” said Mitsushige Akino, Tokyo-based executive officer at Ichiyoshi Asset Management Co. “They remain dovish as the outlook for the economy continues to be as tough as it was in March.”

Stocks Advance

Companies that do business in China and the U.S. rose. Daikin gained 2.9 percent to 5,759 yen. Alps Electric Co., a maker of electronic parts that gets 16 percent of revenue in Asia’s largest economy, added 3.1 percent to 1,160 yen. Nissan increased 1.3 percent to 908 yen, and Panasonic Corp., an electronics manufacturer that generates 15 percent of sales in the Americas, advanced 1.9 percent to 1,065 yen.

Fuji Heavy Industries Ltd. jumped 5.1 percent to 2,536 yen after JPMorgan Chase & Co. raised the rating of the maker of industrial machinery and Subaru cars to overweight from neutral.

Mitsui Mining & Smelting Co. advanced 4.2 percent to 250 yen. The metal producer’s price target was raised to 340 yen from 325 yen at Nomura Holdings Inc., which maintained the company’s buy rating.

Acom climbed 3.9 percent to 397 yen, while Aiful Corp. advanced 5.8 percent to 401 yen. The ruling Liberal Democratic Party of Japan is in talks to raise the interest-rate ceiling from 20 percent, TBS reported.

Sanrio plunged 16 percent to 2,598 yen. Analysts including Sho Kawano at Goldman Sachs Group Inc. cut targets for the company, citing a waning outlook for U.S. sales.

Nuclear Ruling

Kansai Electric Power Co., Japan’s second-biggest utility and the most reliant on nuclear power, lost 4 percent to 902 yen after a court ruled against restarting its two reactors. The Fukui District Court said the need for nuclear power does not trump individuals’ rights to safety.

The Bank of Japan refrained from boosting stimulus yesterday. The central bank will add additional measures by the end of its July gathering, according to 44 percent of economists polled by Bloomberg.

Monetary easing and government spending drove a world-beating 51 percent jump for the Topix in 2013. The gauge fell 10 percent this year, the most among 24 developed markets tracked by Bloomberg, amid concern the measures won’t be enough to revive the economy and generate inflation.

The Topix traded at 1.1 times book value today, compared with 2.6 for the S&P 500 and 1.9 for the Stoxx Europe 600 Index yesterday.

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