Japanese Stocks Advance to Two-Week High on Steelmaker Merger, Earnings

Feb 4, 2011 12:51 PM GMT+0530
By Norie Kuboyama

Japanese stocks rose, sending benchmark indexes to their highest levels since Jan. 19, as steelmakers surged on a merger proposal and some company earnings improved.

Nippon Steel Corp., Japan’s largest steelmaker, jumped 9.1 percent after announcing a plan to combine with Sumitomo Metal Industries Ltd., which soared 16 percent. Mitsubishi UFJ Financial Group Inc., Japan’s No. 1 publicly traded bank, gained 0.9 percent after profit more than doubled. Sony Corp., Japan’s biggest exporter of consumer electronics, climbed 1.8 percent after reporting profit that exceeded analysts’ estimates.

If the merger proposal triggers further consolidation, that will likely make “a good impact” on investors’ outlook for the Japanese economy, said Ayako Sera, a strategist in Tokyo at Sumitomo Trust & Banking Co., which manages about $331 billion. “Company earnings are improving this year, beating the market consensus.”

The Nikkei 225 Stock Average rose 1.1 percent to 10,543.52 at the close in Tokyo. The broader Topix gained 0.8 percent to 935.36, with more than three times as many shares advancing as declining. For the week, the Nikkei 225 climbed 1.8 percent, while the Topix increased 1.7 percent. Both gauges gained for a second week.


Steelmakers had the biggest increase in the Topix among its 33 industry groups. Nippon Steel jumped 9.1 percent to 313 yen and Sumitomo Metal Industries surged 16 percent to 224 yen. They were the two largest contributors to the Topix’s gain.

Steelmakers’ Merger

Japan’s No. 1 and No. 3 steelmakers plan to combine to cut costs in what may be the country’s biggest non-bank takeover, aimed at gaining leverage over raw-material purchases and pricing of the metal as costs soar.

“Expectations are increasing for improved performance in the steel industry,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “If domestic competition is mitigated, there’s more chance of guaranteeing profit margins.”

The proposed merger between Sumitomo Metal Industries and Nippon Steel will create synergies for both companies as well as benefit “the wider steel industry by helping to increase pricing and margins,” Goldman Sachs Group Inc. analysts Rajeev Das and Nana Hasegawa said in a report dated today.

Mitsubishi UFJ rose 0.9 percent to 440 yen. The lender joined smaller rival Mizuho Financial Group Inc. in posting third-quarter profit that more than doubled as bad-loan costs fell. Mizuho, Japan’s No. 3 publicly traded lender, was unchanged at 162 yen, after rising as much as 2.5 percent earlier today.

U.S. Jobs

The Standard & Poor’s 500 Index climbed 0.2 percent yesterday in New York as retailers gained after sales exceeded projections and U.S. applications for jobless benefits decreased by 42,000 to 415,000 in the week ended Jan. 29. Economists had forecast claims would fall to 420,000, according to the median estimate in a Bloomberg News survey.

The Topix has gained 4.1 percent this year. Stocks in the index were valued at 16 times estimated earnings on average, compared with 13.6 times for the Standard & Poor’s 500 Index and 11.3 times for the Stoxx Europe 600 Index.

This week is the peak for quarterly results in Japan, with more than a third of the Topix index’s 1,668 companies scheduled to report earnings. Of the 803 companies that have posted net income since Jan. 1 for the latest quarter, 117 have exceeded analysts’ estimates, while 88 have missed them, according to data compiled by Bloomberg.

Sony Earnings

Sony, the maker of Bravia televisions, gained 1.8 percent to 2,919 yen. The company reported net income of 72.3 billion yen ($886 million) in the three months ended Dec. 31, beating the 65.9 billion yen average of six analyst estimates compiled by Bloomberg. Hitachi, a maker of products from home appliances to nuclear reactors, advanced 3 percent to 487 yen after raising its full-year net-income forecast 15 percent, citing cost cuts.

Softbank Corp., the exclusive provider of Apple Inc.’s iPhone in Japan, rallied 3.6 percent to 2,976 yen, the single largest contributor to the Nikkei 225, after boosting its annual operating profit forecast 20 percent, citing demand for the touch-screen smartphone. Softbank was the third-most active stock by value in Japan, following Sumitomo Metal Industries and Nippon Steel.

Jtekt Corp., an autoparts maker, soared 7.8 percent to 1,159 yen and had the third-biggest advance in the Nikkei, after CLSA Asia Pacific Markets boosted the stock price estimate to 1,250 yen from 1,100 yen, maintaining the “outperform” rating. Jtekt had a return to a nine-month profit from a year-earlier loss, the company said in a release before the market closed yesterday.

Mazda Motor Corp., Japan’s second-largest car exporter, sank 4.6 percent to 227 yen and had the sharpest fall in the Nikkei, after turning into a loss in the three months ended Dec. 31. Mazda posted a third-quarter net loss of 2.67 billion yen after a stronger yen cut the competitiveness of its exports.
(souced:Bloomberg.com)

If you believe an article violates your rights or the rights of others, please contact us.