Most Japan Shares Rise as Stimulus Bets Offset Brexit Concerns

  • Construction and warehouse shares rise; exporters decline
  • Nikkei 225 rebounds after falling below key 15,000 level

Most Japanese stocks rose as optimism over the possibility of further stimulus offset concerns about the fallout from the U.K. vote to secede from the European Union.

About five shares rose for every four that fell on the Topix index, which slid in the final minutes of trading to close 0.1 percent lower. The gauge rebounded from a 2.2 percent loss in the morning to rally as much as 0.6 percent, as a government meeting with the Bank of Japan fueled speculations for more easing. The Nikkei 225 climbed 0.1 percent to 15,323.14 after briefly breaking below 15,000.

Central bank Governor Haruhiko Kuroda, speaking to reporters in Tokyo after a meeting with Prime Minister Shinzo Abe and other members of his government, declined to comment on any emergency BOJ meeting. Abe said Japan would continue to monitor markets carefully, while Finance Minister Taro Aso said he’s watching currency moves with a sense of urgency and will take action as needed.

“There must be some domestic information on stimulus being spread,” said Hiroaki Mino, a senior strategist at Mizuho Securities Co. “We’re in a state of emergency, so the BOJ has no need to hold their meetings according to schedule.” An extraordinary meeting wouldn’t come as a surprise, he said.

Investors are watching the yen for clues on the trajectory of Japanese stocks. The currency soared against all major peers on Friday, posting its biggest gain against the dollar since the Asian financial crisis, after the U.K. shocked investors by voting out of the EU. The yen gained 0.1 percent to 101.95 to the dollar. Every one-yen advance against the greenback reduces carmakers’ operating profits by 84.9 billion yen ($833 million), according to Nomura Holdings Inc.

Futures on the S&P 500 Index added 0.9 percent as the pound strengthened for the first time since Britain’s shock decision to leave the EU. The Nikkei 225 closed higher for a second day after plunging 7.9 percent on Friday following the Brexit vote.

“There’s been some bulk buying of futures after the Nikkei 225 fell below 15,000,” said Masayuki Otani, chief market strategist at Securities Japan Inc. in Tokyo.

Traders are also focused on whether the Finance Ministry will order intervention in currency markets or the BOJ will call an emergency meeting to add to already unprecedented monetary easing. They’re also gauging the prospects for fiscal stimulus. Toshihiro Nikai, chairman of the ruling party’s general council, proposed a 20 trillion yen package to Abe, the Nikkei newspaper reported.

Stimulus Hopes

Construction companies, warehouse stocks and food producers led gains while exporters including carmakers and tire manufacturers fell. The Topix Construction Index added 1.5 percent, the most on the Topix, as builder Taisei Corp. rose 1.7 percent while construction firm Maeda Corp. jumped 5 percent. General contractor Obayashi Corp. climbed 2.3 percent.

“Overall it’s difficult for the market to rise, but construction names are seeing some action with anticipation for future stimulus," said Nobuyuki Fujimoto, a senior market analyst at SBI Securities Co.

The Topix has fallen 21 percent this year, the third-worst performing developed benchmark equity index, while the yen has rallied the most among its major peers. The Topix now trades at 12.4 times estimated earnings, with the Nikkei 225 at 15.2 times expected profits, compared with 17 times for the U.S. S&P 500 Index.

“It’s easier to see defensive buying once you fall below 15,000,” said Norihiro Fujito, a strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “Valuations are low, and for investors taking a medium to long-term view, once you’re below 15,000 you’re in the buying-on-dip zone. You can easily see short-covering.”

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