Tuesday, January 25, 2011

Japanese Stocks Advance, Led by Honda, on Earnings Confidence

By Anna Kitanaka
Jan. 24 (Bloomberg) -- Japanese stocks rose for the first time in three days, led by automakers, after Nomura Holdings Inc. raised its rating on Honda Motor Co. to “buy,” and after General Electric Co. of the U.S. beat earnings estimates.

Honda climbed 3.8 percent. Elpida Memory Inc., the world’s third-largest maker of computer-memory chips, jumped 5.1 percent after Goldman Sachs Group Inc. boosted its investment rating. Yaskawa Electric Corp., a maker of electronic controls, leapt 4.5 percent after the company swung to profit. Tokyo Tomin Bank Ltd., a regional lender based in Japan’s capital, tumbled 6.1 percent, leading a decline by banks.

“There are strong expectations that earnings will improve,” said Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd., which manages about $57 billion in assets. “As we’re seeing increasing earnings abroad, Japanese exporter shares are rising.”

The Nikkei 225 Stock Average increased 0.7 percent to 10,345.11 at the close in Tokyo. The broader Topix index also gained 0.7 percent to 917.18, after earlier falling as much as 0.1 percent. About three shares rose for each that fell on the Topix.

The Topix has gained 2 percent this year, driving the average price of shares in the index to 15.8 times estimated earnings on average, close to the highest level since August.

General Electric
The gauge sank 1 percent in 2010 as the yen rose to its strongest annual average level against the dollar since currencies became freely traded in 1971, dimming the outlook for export earnings. Confidence in a global recovery was also damped by Europe’s debt crisis, China’s steps to curb inflation and concern U.S. growth will weaken.

In the U.S., the Standard & Poor’s 500 Index increased 0.2 percent in New York on Jan. 21 after General Electric, the world’s biggest maker of jet engines, medical-imaging equipment and power turbines, reported fourth-quarter earnings from continuing operations of 36 cents a share, exceeding the average estimate from analysts of 32 cents. General Electric Co. is considered a proxy for world growth.

Automakers as a group were the biggest boost to the Topix among the index’s 33 industry groups.

Honda Leads Gains
Honda, Japan’s second-largest automaker, gained 3.8 percent to 3,400 yen, the biggest contributor to the Nikkei 225’s advance. The company was raised to “buy” from “neutral” by Nomura analyst Masataka Kunugimoto, who estimated the shares may reach 4,300 yen within the next 12 months. Honda’s U.S. sales are looking favorable, and earnings may increase, Kunugimoto wrote in a Jan. 21 report.

Toyota Motor Corp., the world’s largest carmaker, gained 1.3 percent to 3,415 yen. Nissan Motor Co., the third-biggest automaker in Japan, climbed 0.7 percent to 830 yen.

“Earnings in the U.S. are improving,” said Kazuhiro Takahashi, a general manager at Tokyo-based Daiwa Securities Capital Markets Co. In Japan, “there are expectations that domestic companies will also post good results.”

Elpida rose 5.1 percent to 1,134 yen. Goldman Sachs increased its investment rating to “buy” from “neutral” and boosted its share-price estimate to 1,350 yen from 950 yen.

Yaskawa Electric Corp., a Japanese machinery maker, jumped 4.5 percent to 867 yen. The company turned to a nine-month net income of 4.32 billion yen from a year-earlier loss on a 41 percent surge in sales.

Banks Decline
Fuji Heavy Industries Ltd., the maker of Subaru-brand cars, advanced 1.3 percent to 690 yen. The company’s operating profit for the fiscal year to March 31 will likely triple to about 80 billion yen, the Nikkei newspaper reported. That compares with the company’s earlier forecast of 70 billion yen, Nikkei said.

The Topix Banks Index fell 0.4 percent today, the biggest decline among the Topix’s industry groups.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, dropped 0.5 percent to 441 yen. Mizuho Financial Group Inc., the No. 3, declined 1.2 percent to 164 yen.

Tokyo Tomin Bank tumbled 6.1 percent to 1,168 yen. JPMorgan Chase & Co. cut its investment rating on the stock to “underweight” from “neutral.”

The Topix bank index rose 2.7 percent this year through Jan. 21, double the broader Topix index’s 1.3 percent gain in the same period. The bank sub-group’s relative-strength index, a measure of price momentum, was at 71.27 on Jan. 19, above the 70 threshold that some traders use as an indicator to sell.

“Bank shares have been on a steady climb, so now people are cautious about the price and want to capture their earnings,” said Hideyuki Ishiguro, assistant manager at the investment strategy department at Okasan Securities Co. in Tokyo.

-- With assistance from Kotaro Tsunetomi. Editors: Sam Waite, John McCluskey.


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