Nikkei in Japan Gains 2.8%; Dividend Recapture Boosts Demand

Nigel Thomas
27 Sep, 2011
New York City

Stocks in Japan rebounded following a rally in Asian markets. The optimism linked to the euro zone progress in containing the widening debt contagion and the last day to purchase stocks to receive first half dividend also supported the indexes.

[R]6:00 PM Tokyo – Stocks in Japan rebounded following a rally in Asian markets. The optimism linked to the euro zone progress in containing the widening debt contagion and the last day to purchase stocks to receive first half dividend also supported the indexes.[/R]

Banks and resource stocks led the advance in the benchmark index in Tokyo after the European leaders appear close to setting up a rescue fund for the euro zone. Stocks also gained on the last day for shareholders on register to receive first half dividend.

The plan includes leveraging 400 billion euro fund and use the unlimited money printing authority of the European Central Bank to issue the euro zone bonds guaranteed by all nations.

The European Financial Stability Facility is close to getting approval from 9 of the 17 member nations and Finland and Greece are close to agreeing on the terms of the collateral.

Separately, the IMF chief Chrisitine Lagarde asked Greece to provide written guarantees of timetable for the new austerity measures and estimated revenues.

Greek parliament later today is expected to approve a controversial property tax and new austerity measures that will cut government staff salary cuts by 20%.

The Nikkei 225 Stock Average added 2.8% to 8,609.9 and the broader Topix index added 2.7% to 748.55.

The yen edged lower to 76.26 from 76.16 against one dollar.

Trading volume on the First Section on the Tokyo Stock Exchange decreased to 1.5 billion shares from 2.1 billion shares yesterday. In trading, 1,535 shares gained and 87 decreased.

Stock Movers

The Tokyo Electric Power Company dropped 6.2% to 243 yen and declined as low as 214 yen after a report suggested that the cost of the disaster compensation may be between 3 trillion and 4 trillion yen.

The report in the Nikkei business daily also noted that the utility may run out of cash if it does not increase rates or restart its nuclear plant in Nigata Prefecture.

Dai-ichi Life dropped 4% to 79,000 yen after the European leaders appear to make a progress in setting up the rescue funds. The insurance company has exposure to Spain and Greece’s bonds worth $4.2 billion.

Nippon Yusen KK increased 5 yen to 210 yen and Mitsui OSK Lines Ltd added 7 yen to 306 yen.

Mitsubishi UFJ Financial Group rose 4.3% to 343 yen and Sumitomo Mitsui Financial Group increased 3.4% to 2,148 yen.

Mitsubishi Corp rose 3.6% to 1,622 yen and Mitsui & Co fell 3% to 1,208 yen.

Toyota Motor increased 3% to 2,660 yen and Honda Motor Co. added 76 yen to 2,321 yen and Nissan Motor increased 28 yen to 648 yen.

Sony Corp rose 3.6% to 1,475 yen, Panasonic Corp increased 5% or 35 yen to 740 yen and Canon Inc increased 145 yen to 3,505 yen. Sharp Corp increased 29 yen to 610 yen.

Olympus rose 118 yen to 2,390 yen. Fanuc rose 3.1% to 10,770 yen. Kyocera added 3.8% to 6,610 yen.

Komatsu added 69 yen to 1,706 yen and Hitachi Construction Machinery Co increased 62 yen to 1,254 yen.