Topix Rebounds From Yesterday’s Drop on Energy Explorers

Japanese shares rose, with the Topix index erasing yesterday’s decline, as energy explorers and insurance companies led the advance.

Japan Drilling Co. climbed 3.1 percent and MS&AD Insurance Group Holdings Inc. added 2.5 percent. Daiichi Sankyo Co. gained 1.7 percent after Mizuho Securities Co. raised the drugmaker’s rating. Takata Corp., whose airbags caused the recall of more than 3 million vehicles last year, fell 4.1 percent on saying the defective parts may need to be fixed again.

The Topix added 0.8 percent to 1,239.07 at the close in Tokyo after dropping 0.5 percent yesterday. All but one of the gauge’s 33 industry groups climbed today. The Nikkei 225 Stock Average increased 0.5 percent to 15,069.48.

“Japanese stocks are still relatively cheap and playing catch-up with other developed markets,” said Hitoshi Asaoka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank. “Conditions are not bad. The market may get corrected once in a while like yesterday, but it will be a healthy correction.”

While the Topix climbed 7.7 percent from a recent low on May 21, it’s still the worst performer this year among 24 developed markets tracked by Bloomberg. The measure capped a world-beating rally last year as the Bank of Japan pressed ahead with its record monetary easing. The central bank is scheduled to meet June 12-13.

Relative Value

The Topix traded at 1.2 times book value today, compared with 2.7 for the Standard & Poor’s 500 Index and 1.9 for the Stoxx Europe 600 Index yesterday.

A Topix group tracking energy explorers advanced 2.9 percent to the highest level since April 2011. Japan Drilling advanced 3.1 percent to 4,815 yen, while Inpex Corp. added 3.1 percent to 1,554 yen.

The Topix Insurance Index advanced 1.8 percent with all six members climbing. MS&AD Insurance gained 2.5 percent to 2,556 yen. Life-insurer T&D Holdings Inc. gained 2.1 percent to 1,382 yen.

Daiichi Sankyo rose 1.7 percent to 1,765 yen after Mizuho Securities raised the company’s rating to buy from neutral, saying new products will drive earnings growth.

Takata lost 4.1 percent to 2,151 yen. Honda Motor Co., which Takata supplies, has received a notice of potential mistakes with last year’s airbag recall and of accidents involving some models, though none of them are Honda cars, said Akemi Ando, a spokeswoman at the carmaker. Honda is studying whether to order a recall, she said. Takata officials weren’t immediately available to comment.

Seven & I Holdings Co. added 0.9 percent to 4,155 yen after the Nikkei newspaper reported the convenience-store operator’s quarterly operating profit probably rose to a record even after the national sales tax increased in April.

Growth Strategy

Japan’s government yesterday released a draft summarizing the main themes of its growth strategy without providing details on the planned changes. Lawmakers will push for “growth-orientated corporate tax reform,” according to the draft. Company tax cuts will begin from the fiscal year starting next April, Economy Minister Akira Amari said yesterday, with the particulars still under negotiation.

Japan Post Insurance Co. and Japan Post Bank Co. may sell sovereign bonds and and buy stocks to improve profitability ahead of the expected listing of parent Japan Post Holdings Co. next year, Kenji Abe, chief equity strategist at Citigroup Global Markets Japan Inc. in Tokyo, wrote in a report.

Global Outlook

The World Bank cut its global economic expansion forecast amid a weaker outlook for the U.S., Russia and China, while calling on emerging markets to strengthen their economies before the Federal Reserve raises interest rates. The world economy will expand 2.8 percent this year, down from a January projection of 3.2 percent, the bank said. The forecast for Japan was trimmed to 1.3 percent from 1.4 percent.

Futures on the S&P 500 lost 0.1 percent today. The equity measure fell less than 0.1 percent yesterday, halting a four-day streak of record closes, as investors weighed equity valuations. The Dow Jones Industrial Average closed at an all-time high.

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