BLBG: Japan’s Nikkei 225 Climbs on Earnings Outlook; Kirin Advances
Japan’s Nikkei 225 Stock Average climbed on confidence corporate profitability is recovering, stoking speculation the global recession is over.
Daiwa House Industry Co., the nation’s top homebuilder, rose 4.8 percent, while Tokyu Land Corp. gained 4.3 percent after both companies posted higher-than-forecast profits. Kirin Holdings Co. surged 5.7 percent after Morgan Stanley boosted the stock’s rating on the prospects for earnings growth. Tokyo Electric Power Co., Asia’s biggest utility, lost 1.3 percent on concern interest rates will rise and increase costs.
The Nikkei 225 Stock Average gained 0.6 percent to 10,326.25 as of 2 p.m. in Tokyo. The broader Topix index fell 0.2 percent to 907.21. Both gauges were set for a gain of 0.7 for the week, their third-straight weekly advance. Shipping lines climbed as an index of bulk rates rose for a sixth day.
“First-half profits look likely to exceed expectations, however I’m not confident that demand is there to support earnings in the second half,” said Hiroyasu Ito, a Tokyo-based fund manager at Dai-Ichi Mutual Life Insurance Co., which holds the equivalent of $296 billion in assets. “The momentum behind stocks is still good, even though shares aren’t really cheap.”
A total of 35 Japanese companies are scheduled to report results today, the start of a monthlong earnings season.
In New York yesterday, the Standard & Poor’s 500 Index jumped 1.1 percent. Insurers and banks led the climb as quarterly profit at insurer Travelers Cos. quadrupled and banks including PNC Financial Services and Fifth Third Bancorp said loans were becoming more profitable as they paid less on deposits.
Daiwa House
The Topix has climbed 5.9 percent this year, set for its best annual performance since 2003. Stocks in the gauge are valued at 1.1 times book value, compared with 2.3 times for the S&P 500 and 1.7 times for Europe’s Dow Jones Stoxx 600 Index.
Daiwa House climbed 4.8 percent, the most since Aug. 24, to 1,014 yen. The homebuilder said in a preliminary earnings report yesterday cost cuts helped first-half profits total 21 billion yen ($223 million), more than the company’s 9 billion forecast.
Tokyu Land, which develops apartments in western Tokyo, rose 4.3 percent to 409 yen. First half profit was 31 percent higher than the company’s original estimate, Tokyu Land said yesterday.
Nomura Real Estate jumped 2.2 percent to 1,617 yen. The developer produced net income of 7.5 billion yen for the same period, aided by land sales and lower costs, according to a preliminary report. That compared with its 4.5 billion yen estimate.
Shipping Lines
Kirin added 6.2 percent to 1,489 yen. Morgan Stanley’s Taizo Demura lifted the shares to “overweight” from “equal weight” in a note yesterday. The company is likely to realize cost saving from its planned merger with Suntory Holdings, the analyst wrote.
Tokyo Electric Power dropped 1.3 percent to 2,230 yen, and Kansai Electric Power Co. slid 1.4 percent to 1,981 yen.
Yields on 10-year Japanese government bonds climbed to a two-month high today. The Nikkei newspaper said on Oct. 20 that Finance Minister Hirohisa Fujii “indicated” new government debt sales may exceed 50 trillion yen for the year to March 2010.
“Investors are starting to bet long-term interest rates will go up, considering Japan’s current financial state,” said Tsutomu Yamada, a market analyst at kabu.com Securities Co. in Tokyo. “Higher borrowing costs will inevitably increase interest-repayment burdens on power generators.”
Shipping Lines
Commodities declined yesterday as the dollar strengthened and speculation mounted the Organization of Petroleum Exporting Countries will increase production. Copper declined 1.3 percent in New York yesterday, retreating from a 13-month high. Crude oil for December delivery slipped 0.2 percent to $81.19 a barrel.
Mitsui O.S.K. Lines Ltd., the world’s largest merchant fleet operator, gained 1.6 percent to 574 yen, while Kawasaki Kisen Kaisha Ltd., Japan’s third-biggest shipping line by sales, rose 0.8 percent to 378 yen.
The Baltic Dry Index, a measure of shipping tariffs for commodities, rallied 16 percent in the last six days, boosting the profit outlook for transporters.
Stocks were also buoyed after the yen depreciated to as low as 91.71 versus the dollar in U.S. trading, a level not seen since Sept. 22. The weaker yen boosts the value of sales generated overseas in local terms for Japanese companies.
