Tokyo Surged 3.7%, Asian Markets Rally

123jump.com Staff
19 Sep, 2007
New York City

Stocks in Tokyo soared on the rate cut in the U.S. and the Bank of Japan leaving the rates unchanged. Nikkei 225 index surged 3.67% and Topix index added 3.8% after the news. Cosmo Oil, refiner, sold 21% stake to a company controlled by UAE government. Financial stocks led the rally. Markets across Asian surged led by a sharp rise in Hong Kong, Australia, and Singapore.

[R]6:00AM NewYork,7:00PM Tokyo - Tokyo surged 3.67% higher, the most in five years, while the broader Topix Index rose 3.8%. Bank of Japan kept interest rates on hold at 0.5% to forestall further economic slump. Cosmo Oil to sell 28.85% stake to UAE controlled company.[/R]

Tokyo stocks soared 3.7%, most in five years, bucking yesterday’s downtrend, led by energy-related stocks and exporters on easing concerns of global shortage of credit and economic slowdown in the U.S. Oil prices continue to scale record high. Of the 225 Nikkei stocks, 216 advanced, 7 declined, while 2 traded unchanged.21stocks firmed by more than 5% and only 2 stocks shed more than 1%.

In Tokyo trading, the Nikkei 225 jumped 3.7%, or 579.74 to 16,381.54, reversing yesterday’s losses when the market retreated by 2.2%. Commodity and energy-related stocks led the rally as the oil prices scaled $82 per barrel yesterday. The Bank of Japan kept its interest rate on hold at 0.5% by 8 to 1 vote, remaining as the lowest benchmark rate among developed economies. The decision by the Bank of Japan is against the backdrop of shrinkage in the GDP by an annualized 1.2% in the second quarter and efforts to stave off a decade-old deflation. Governor Toshihiko Fukui said he will gradually increase interest rates to avoid inefficient investment and sustain long-term economic growth. Fukui also noted that Japanese investor held 1,555 trillion yen worth of financial assets, up 2.9% a year earlier. Market watchers also lowered economic growth forecast for the fiscal year to 1.8% from an estimate of 2.2%.

The 10-year bonds fell as Bank of Japan’s Mizuno voted against holding the rate, supporting an interest rate hike to curb excessive borrowing. The slide, the biggest in 6 months, saw the yield on the 10-year note rising by 6 basis points to 1.59%. The price of the 1.7% note due September 2017 slipped 0.527 to 100.947 yen.

Of the index shares, commodity stocks and exporters gained the most, while Japan’s biggest lender by assets Mitsubishi UFJ Financial Group, gained the most in two years, soaring 6.11%. Oil company Inpex Holdings paced the advancers, surging 100,000 yen or 8.93% on news that oil traded at a record $82.37 per barrel in yesterday’s trade. Engineering firm JGC added 8.42% followed by Sumitomo Metal Mining, which gained 8.26% spurred by the continued rally of metal prices. Tokyu Land Corporation spiked 7.89%, and Sojitz Corporation completed the top five gainers, climbing 7.86%.

Food and confectionary company’s Meiji Seika and Nisshin Oillio led decliners shedding 5.6% and 1.11% respectively. OJI Paper Company slipped 0.91%, while Topy Industrial slid 0.63%.

Exporters, especially automobile manufacturers spurred the rally on stocks as expectations that the U.S., Japan’s biggest export market, might slip into an economic recession eased followed a better-than-expected interest rate cut of half percentage points by the Federal Reserve. Toyota Motor Corporation advanced 4.52%. The company generated 35% of its sales from North America last year. Honda, the second biggest automaker in Japan, also rallied 3.47% on its exposure to the U.S. market.

Financial stocks further posted significant gains, with Mitsubishi UFJ advancing 6.11% despite news that its subsidiary Union Bank of California was fined $31.6 million by U.S. regulators for failing to establish and maintain adequate anti-money laundering program. Mizuho Financial also firmed 4.94%.

Cosmo Oil, Japan’s fourth largest oil refiner, announced that it will sell a controlling 20.85% stake for 82.9 billion yen to the International Petroleum Investment Company, a company based in Abu Dhabi.