Japan Shares Rise as Exporters Boost Gauge, Developers Rebound

  • Yen declines against dollar after three days of gains
  • Topix closes as its highest since May 31, boosting valuations

Japanese stocks advanced to close at the highest level in almost five months as investors bought brokerage and developer shares on appealing valuations while exporters climbed as the yen fell for the first time in four days.

The Topix index closed at its highest level since May 31, while also ending the day at its most expensive relative to earnings since March. The yen slipped against the dollar, paring a 0.7 percent increase over the past three sessions, after Hillary Clinton and Donald Trump finished their third and last debate before the Nov. 8 U.S. presidential election. Sharp Corp. jumped 7.7 percent on optimism its earnings will improve, while a gauge tracking real estate firms, which has underperformed the broader market this year, climbed 3.8 percent.

SecurityPercent ChangePrice
Nikkei 225+1.4%17,235.5

“There may not be a huge driver right now, but overall, I feel like sentiment has been turning more positive recently,” said Hajime Sakai, a fund manager at Mito Securities Co. in Tokyo. “So even though investors are not buying with huge confidence, they’re watching the market and slowly starting to increase.”

The Topix index had been trading in a tight range this week as uncertainties over when the Federal Reserve will raise interest rates, the U.S. election, and the outlook for corporate earnings weigh on investors’ minds. Still, the Japanese benchmark equity index is up 3.6 percent so far this month, with exporters including Fanuc Corp., Toyota Motor Corp. and Honda Motor Co. among companies boosting the gauge.

With more than 350 Topix companies set to report earnings next week, attention is shifting to whether Japan Inc. can overcome hurdles such as a stronger yen this year and patchy global growth. A recovery in raw-material prices, real estate and the services industry has turned an earnings-revision index, a measure compiled weekly by Daiwa Securities Group Inc. that shows the number of analyst downgrades versus upgrades in current profit estimates, positive for the first time since January.

The Topix now trades at 14.2 times estimated earnings, the highest level since March 31. Still, that compares with 18.2 times for the S&P 500 Index and 16.2 times for Europe’s Stoxx 600 Index. The Japanese measure is down 11 percent this year after foreign investors disappointed in Prime Minister Shinzo Abe’s policies to rekindle the economy dumped the nation’s equities at the fastest pace since 1987.

Developers led gains among the Topix’s 33 industry groups, taking the Topix Real Estate Index’s advance this week to 7.3 percent. Mitsubishi Estate Co. jumped 4.3 percent and Sumitomo Realty & Development Co. climbed 4.7 percent. The sector had tumbled 25 percent this year through last Friday. Brokerages, which have also been battered this year, was the second-best performing sector on Thursday.

“The Japanese stock market is heading toward new highs, and investors are buying up sectors that have lagged behind others like developers and brokerages,” said Haruki Kawaguchi, a manager in the stock trading department at Marusan Securities Co. “Developers, in particular, look cheap both in terms of price to earnings and price to book.”

Most equity markets in Asia climbed, with the MSCI Asia Pacific Index advancing 0.3 percent. Clinton and Trump continued to show sharply different views in a range of topics including gun control and abortion, all key issues in the campaign. A Bloomberg Politics poll of likely voters nationwide showed Clinton leading Trump by 9 percentage points before the debate.

“The debate had been a hot topic for the stock market earlier on, but now people are less concerned about the possibility of this taking an unexpected turn,” Mito Securities’ Sakai said.

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