Financials Surge in Tokyo

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

In Tokyo trading, Nikkei gained 2.4% to 16,832.22. The sharp rise in financial stocks helped the index. Three largest banks and real estate companies rallied as investors hoped that troubled U.S. credit market may stabilize in the near future. The talks of investment in Bear Stearns helped as well. Exporters gained as the BoJ board member suggested that the U.S. credit market trouble are not likely to hurt exports from Japan. Resona Holdings led the gainers in the Nikkei index.

[R]9:00AM New York, 9:00PM Tokyo - Financial stocks lift Japan higher on improved sentiment.[/R]

Japan financial stocks rallied boosted by confidence lenders will recover from the global credit crunch. Investor confidence in lenders heightened on expectations the U.S Federal Reserve will cut interest rates further after a drop in U.S. durable goods orders.

In Tokyo trading Nikkei 225 added 2.41% or 396.48 to 16,832.22, the highest in seven weeks. Banks and realty stocks led the advance. Resona Holdings led the gainers in the sector with a sharp rise of 13.41%. Mitsubishi UFJ Nicos, Shinsei Bank Limited rallied as well. Of the Nikkei index shares 209 gained, 14 declined and 2 were unchanged. Suruga Bank Ltd. Soared 11% after the bank said that it exploring an arrangement for branch network and small business lending. Real estate developers Mitsui Fudosan jumped 7.7% and Sumitomo Realty & Development added 8%.

Bank of Japan board member Miyako Suda said today there’s need to raise the key interest rate to prevent the economy from overheating, adding that the credit market turmoil will have limited impact outside the U.S. She explained that the bank needs to monitor how the turbulence on the stock and money markets will ultimately affect sentiment of both companies and consumers. Suda while addressing a group in the Western Japan said that BoJ must take gradual but proactive action to lower the risk of overheating in the economy.

Bank of Japan last week kept the overnight lending rate on hold at 0.5%, remaining as the lowest in industrialized nations, cautioning that the bank will only raise interest rates when the credit markets stabilize.

The yen also traded firmer against a retreating dollar. The U.S. currency was quoted at 115.61 yen from 115.55.

Of the index shares Resona Holdings led the gainers, climbing 13.41%, followed by a 12.02% rise in Mitsubishi UFJ Nicos, 11.58% in Shinsei Bank Limited, 11.22% in Daiwa Securities Group and 10.55% in Credit Saison. Daikan Industries led the decliners, slipping 1.73%. Nippon Express lost 1.58%. Yokohama Rubber slumped 1.46%, Sumitomo Metal Mining shed 1.08% and Hino Motors retreated 0.99%.

Consumer lender Takefuji said today it will spend 10 billion yen to buy back 2.13% of its total shares. The company has lost 59% of its market value in the past year. Nikkei Newspaper reported that the consumer lender may post a 51 billion yen profit for the year ending March 31st. Another consumer lender Shares of Aiful have lost 53 percent of their value in the past year as the consumer loan industry has been rattled by customer claims for interest refunds following a change in the law stipulating that borrowers can claim refunds for excessive interest rate charges. On the news, three largest lenders, Takefuji, Aiful, and Promise jumped 15%.

Dramexchange, Asia’s biggest spot market for dynamic random access memory chips, said DRAM prices are likely to rise as demand swells up to the end of the year.

[R]5:00AM New York, 5:00 PM Sydney – Stocks in Australia jumped to a record close on the dollar reaching eighteen year high.[/R]

In Sydney trading ASX 200 Index gained 0.87% or 56.7 to 6,538.10.

Fortescue Metals Group, BHP Billiton, Rio Tinto and others rose sharply after Merrill Lynch forecasted that iron ore price may be raised by 50% for the next year shipment. The Fortescue jumped 2.4%, BHP added 0.8%, and Rio Tinto increased 1.3%.

The price negotiations begin in two weeks and are likely to be tense as Chinese steel makers may not agree on price increases. The iron ore prices have jumped more than 200% in the last four years. Steelmakers around the world are bracing for higher raw material costs that they have managed to pass to customers. Auto and other appliance makers are bearing the brunt of most of the price hikes. The World''s three largest iron ore importers Rio Tinto, BHP and CVRD of Brazil may seek price hike of 30% as demand from Chinese steelmakers is expected to exceed the ore supply. Australian benchmark shipment iron ore price is at $51.40.

Analysts predict iron prices to remain strong until 2010. Iron-ore miners are expanding capacity but demand growth is outstripping the supply from Australia, Brazil, and Africa. Steelmakers have been able to pass on higher ore prices to its customers. Hot rolled steel price used in making automobiles and household goods is up 11% from a year ago. Demand for iron ore supply is expected to rise at 11% and supply by 8%.

Woodside Petroleum is in a deal to sell to its Mauritania based oil exploration project to Malaysia''s state oil company Petronas for $418 million. The assets included a 47 percent in Mauritania''s only oil-producing project, Chinguetti field, and stakes in areas including Tiof, Tevet and Banda according to the filing with the Australian Stock Exchange. Woodside has sold the assets after it ran into political problems and less than expected oil reserves in the field. Chinguetti has an estimated reserve of 53 million barrels after the figure was slashed in November and its oil field produces 75,000 barrels of oil a day. Woodside stock rose by 0.5% today. The company had earlier announced that it plans to exit all of its operations in Africa. Woodside has explorations projects in Kenya, Libya, Algeria, and Liberia.

Rio Tinto group''s subsidiary, Energy Resources, that produces more than a 10th of the world''s mined uranium, has indicated that it will spend A$57 million expanding its Ranger mine in Australia''s Northern Territory, in order to add 4,857 metric tons of uranium oxide to the site''s reserves.


The Australian dollar traded to 18-year high on the back of widening yield premium. Indications of further interest rates cuts by the Federal Reserve also propped up the Aussie dollar which rose by 12% in the last four weeks. The Aussie dollar closed at $0.8795 at the close of trade, compared with $0.8729 late yesterday. The traders expect Aussie dollar to cross $0.8900 by the yearend. The Aussie currency has now risen by 5.5% since Sept. 18, when the Fed cut rates by half-a-percentage point to 4.75 percent. Traders looking to exploit arbitrage are focusing on yield spread of 2.5% between the Australian and the U.S. short term government bonds.

Of the ASX 200 index shares, Queensland Gas led the gainers with a rise of 8.44% followed by increases in Energy Resource Australia by 6.52%, in Paladin Resource by 5.72%, in Cabcharge Australia by 5.4%, and in Aquarius Platinum by 5.26%. Of the ASX 200 index stocks Centro Retail Group led the decliners with a fall of 4.9% followed by losses in Nufarm Ltd of 3.2%, Gud Holdings by 3.1%, in Compass Resources by 2.9%, and 2.9% in Aristrocrat Leisure.