Banks Drive Tokyo Stocks Higher

123jump.com Staff
18 Oct, 2007
New York City

Japanese stocks rebounded as banks and brokerage stocks recovered. Nikkei 225 index added 0.9% to close at 17,106.09. IMF lowered the economic growth rate in Japan for 2007 and 2008. Banks rebounded as investors hoped that their exposure to subprime mortgages in the U.S. is limited. Mitsubishi UFJ, Sumitomo Mitsui Financial, and Credit Saison are liklely to bid for credit card business run by the airline JAL.

[R]6:00AM New York, 7:00PM Tokyo-Tokyo surges 0.89% on resurgent financial stocks. IMF lowered Japan’s economic growth rate to 2% in 2007 and to 1.7% in 2008.[/R]

In Tokyo trading Nikkei 225 rose 0.89% or 150.78 to 17, 106.09, while the broad Topix Index gained 1.67% to 1,610.94. Banks recovered on renewed optimism among investors despite steady stream of losses from the U.S. banks in the mortgage securities. Mizuho Financial increased 3.8%, Mitsubishi UFJ added 2.3%, and Nomura edged 1.5%.

Of the Nikkei 225 stocks 151 gained, 62 declined and 12 were unchanged. Sumitomo Chemical Company led advancers with a rise of 7.34%, followed by Hitachi Zosen climbing 5.38% on Indian stocks recovery. Financial stocks gained on easing concerns on losses associated to the global financial turmoil. Resona Holdings firmed 4.30%. Mitsubishi UFJ rose 2.26% and Mizuho Financial Group edged up 3.78%

In the first section of the Tokyo Stock Exchange 7.7 billion shares valued at 1.1 trillion yen were traded and in the second section 171 million shares valued at 4 billion yen were traded.

The International Monetary Fund yesterday downwardly revised Japan’s economic growth projection for 2007 by 0.6% to 2.1% due to the weaker-than-expected second quarter GDP growth for 2008. Japan’s GDP shrank to an annualized rate of 1.2% in the second quarter.

The Fund in its semi-annual World Economic Outlook report acknowledged that Japanese banks exposure to U.S. subprime mortgage crisis was much more limited than those in Europe, adding the Bank of Japan needs to maintain a “supportive” monetary policy framework to stave off deflation.

IMF said Japan needed strong fiscal adjustment to ensure sustainable decline in public debt and recommended broadening of the income tax base, raising the 5% consumption tax, strengthening tax administration, and advancing structural reforms.

Crude oil price retreated from $89 per barrel to trade at $87.57 per barrel after the weekly report on energy inventory showed a rise in levels in the U.S.

News reports said today Mitsubishi UFJ and Sumitomo Mitsui Financial Group and Credit Saison plan to bid for Japan Airlines credit card unit JAL Card Inc, which is, valued at 100 billion yen. Credit Saison will ally with Mizuho Financial Group in the bid open until the end of October. JAL to reduce its debt by 12% and become profitable is selling non-core assets including the credit card business.

Of the Nikkei 225 index shares, Sumitomo Chemical Company led gainers with a rise of 7.34% followed by gains in Hitachi Zosen of 5.38, in Kumagai Gumi Corp of 4.97%, in Kawasaki Heavy Industries of 4.94% and Asahi Glass Corp of 4.72%.

Of the Nikkei 225 Index stocks, Nippon Paper Group led the decliners with a fall of 3.52%, followed by losses of 2.98% in Sompo Japan Insurance, 2.65% in Konami Corp, 2.42% in Hokuetsu Paper and 2.41% in Millea Holdings.

Shipbuilders gained after the Indian government assured investors that it would not end trading in participatory notes use by hedge fund investors but will require investors to register with regulatory authorities. Kawasaki Heavy Industries rose 4.94%.

Kawasaki Heavy Industries also gained after reporting first half profit of 16 billion yen after the yen weakened against the dollar, averaging 119 yen per dollar over the covered period.

Elpida and other semiconductor stocks gained on Nikkei News reports that the company reported that the company will use 300 mm silicon wafer to produce DRAM chips by March next year. Advantest Corp rose 0.54%.

Mixi Inc. soared 15% to 1.35 million yen after reporting first-half net income of 950 million yen, up 150% from a year ago earnings of 440 million yen.

Retailers declined on the expectations of weak retail sales. Seven & I Holdings tumbled 2.21%, Takashimaya shed 0.47% and Mitsukoshi lost 0.19%.