Japan Stocks Rise on Speculation Declines Weren't Justified
By Patrick Rial and Toshiro Hasegawa
Nov. 20 (Bloomberg) -- Japanese shares rose, reversing earlier losses, on speculation this month's 10 percent declines for the Nikkei 225 Stock Average and Topix index didn't reflect future earnings prospects.
Mitsui & Co., which lost a fifth of its value in November, led a rebound by trading companies.
Japanese shares are the cheapest in 33 years, Goldman, Sachs & Co. said in a report last week. Indexes have fallen even further since then, partly on concern losses on subprime mortgage investments and tighter credit will hurt the overall U.S. economy.
``Japan won't be able to escape the U.S. slowdown, but there's very little chance earnings will be as bad as current prices indicate, so shares are cheap,'' said Masanori Ikunaga, who helps manage $4.1 billion at Sumitomo Mitsui Asset Management Co. in Tokyo.
The Nikkei 225 Stock Average climbed 168.96, or 1.1 percent, to 15,211.52 at the close of trading in Tokyo. The Topix index rose 12.66, or 0.9 percent, to 1,469.27, paring a drop of as much as 2.5 percent.
Mitsui & Co., Japan's second-largest trading company, jumped 85 yen, or 3.7 percent, to 2,390, after slumping 22 percent in November to yesterday. Komatsu Ltd., the world's second-largest maker of construction machinery, rose 140 yen, or 4.5 percent, to 3,260, helping pare an 18 percent decline for this month. Sojitz Corp., a trading house that earlier dropped 4.6 percent today, rallied 20 yen, or 5.1 percent, to 411.
Cheap Shares
Stocks have slumped this month as banks including Citigroup Inc. and Mizuho Financial Group announced losses on subprime mortgage investments, increasing concern the global economy will slow. Japanese stocks were valued at 15.4 times this year's estimated earnings on Nov. 12, the lowest in 33 years, Kathy Matsui, chief strategist at Goldman Sachs, wrote in a note to clients last week. The Topix fell as much as 2.5 percent below its Nov. 12 close.
In addition, the dividend yield on shares included in the Topix was 1.49 percent, higher than the 1.47 percent offered by 10-year government bonds, another factor supporting stock gains, Matsui wrote.
``There's a feeling that even though there's plenty of bad news out there, stocks have been sold more than the situation warrants,'' said Masatoshi Sato, a strategist at Mizuho Investors Securities Co. ``A lot of sellers probably turned into buyers with the Nikkei below 15,000 as worries about more losses retreated.''
Shinsei Stake Sale
Shinsei Bank Ltd. surged 34 yen, or 9.3 percent, to 398. The former Long-Term Credit Bank of Japan Ltd. agreed to sell a 32.6 percent stake to J.C. Flowers & Co. LLC.
The news helped other small banks rally on speculation there will be more mergers and reorganization in the industry. Tokyo Star Bank Ltd., a regional bank controlled by U.S. buyout firm Lone Star Funds, surged 28,000 yen, or 9.7 percent, to 317,000. Aozora Bank Ltd., controlled by U.S. buyout firm Cerberus Partners LP, gained 22 yen, or 6.9 percent, to 340.
Aozora also rose after saying it will partner with Sumitomo Trust & Banking on property transactions and asset management.
Japan Tobacco Inc., the world's third-biggest maker of cigarettes, fell 12,000 yen, or 1.8 percent, to 655,000. The company will make a bid for frozen-food processor Katokichi Co. and then sell a 49 percent stake in the company to Nissin Food Products Co., the Nikkei newspaper reported.
Katokichi soared by the exchange-imposed daily limit of 80 yen, or 19 percent, to 506, its steepest rally since November 1999. Nissin rose 50 yen, or 1.3 percent, to 4,000.
Nikkei futures expiring in December gained 0.9 percent to 15,210 in Osaka and added 0.8 percent to 15,215 in Singapore.
The volume of shares traded on the first section of the Tokyo Stock Exchange was 2.72 billion shares, the most since Aug. 17.
Aozora Bank Ltd. (8304 JT)
Japan Tobacco Inc. (2914 JT)
Katokichi Co. (2873 JT)
Komatsu Ltd. (6301 JT)
Nissin Food Products Co. (2897v
Mitsui & Co. (8031 JT)
Shinsei Bank Ltd. (8303 JT)
Sojitz Corp. (2768 JT)
Tokyo Star Bank Ltd. (8384 JT)
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