Japan Q1 GDP Up 4%, Record Wholesale Inflation

123jump.com Staff
11 Jun, 2008
New York City

Stocks in Japan rose after the yen climbed to a three-month high on speculation that U.S. interest rates may head higher. Automakers also rose on investor upgrades. Daiichi Sankyo agreed to acquire controllng stake in India based generic pharmaceutical company Ranbaxy from the fouding family and may seek to aquire a majority stake at a price of at least $3.6 billion. The producer price index which measures wholesale inflation increased the most in 27 years to 4.7% from 3.9% in April.

[R]5:00AM New York, 7:00PM Tokyo - Japan’s producers price index rises to a 27-year high. GDP surged at annual rate of 4% in first quarter.[/R]

Stocks in Japan rose after the yen climbed to a three-month high on speculation that U.S. interest rates may head higher. Automakers also rose on investor upgrades.

Market sentiment

In Tokyo trading Nikkei 225 rose 1.16% or 162.31 at 14,183.48, and the broader Topix Index increased 0.5% or 6.83 at 1,390.03.

In the first section of the Tokyo Stock Exchange 9.1 billion shares worth 971 billion yen were traded and in the second section 225 million shares valued at 3.9 billion yen changed hands.

Of the Nikkei 225 stocks 135 gained, 77 declined, and 13 were unchanged. Fuji Heavy Industries led advancers in the index shares with a rise of 8.80% after Morgan Stanley upgraded the stock from “underweight” to “equalweight”, citing rising demand and a weakening yen.

Wholesale inflation rises to 27-year high

The Bank of Japan reported today on its website that the Domestic Corporate Goods Prices Index, which measures producers price inflation, increased the most in 27 years to 4.7% from 3.9% in April at 108.7.

Also the Export Price Index was flat at 5.9%, while the Import Price Index rose to 10.8% in April from 10% the previous month.

GDP rises by annualized 4% in the first quarter

The Cabinet Office reported today on its website that the country’s GDP increased by an annualized 4% in the first quarter ended March from the earlier forecast of 3.3% and 1% rate higher than in the previous quarter. Economists expected a rise of 3.8%.

According to the report, private non-residential investment advanced by a revised 0.2% in the review period from a previous estimate of 0.9%. Domestic demand gained 0.5% from an earlier forecast of 0.3% and private demand increased 0.7% from 0.5% that was previously forecasted.

However, the cabinet office showed that private consumption remained flat at 0.8%. First quarter private residential investment soared by 4.6%.

Ranbaxy controlling shareholder sells stake at 31% premium to Daiichi Sankyo

Ranbxy Laboratories based in India controlling shareholder Malvinder Singh and his family agreed to sell controlling interest in the generic pharmaceutical company to Daiichi Sankyo at a price of 737 rupees per share. The largest Japanese pharmaceutical company hopes to acquire more stock from the public investors and valued the company at $8.5 billion.

Daiichi accepts to acquire majority control in the generic pharmaceutical company at a price between $3.4 billion and $4.6 billion. Daiichi is expected to make an offer to acquire 20% additional stocks to meet the takeover rules in India.

This purchase price represents a premium of 53.5% to Ranbaxy’s average daily closing price on the National Stock Exchange for the three months ending on June 10, 2008 and 31.4% to such closing price on June 10, 2008.

Ranbaxy stock closed nearly unchanged at 561 rupees.

Gainers & Losers

Fuji Heavy Industries led advancers in the Nikkei 225 index shares with a rise of 8.80% followed by increases in Fujikura Ltd. of 7.11%, in NGK Insulators of 7.08%, in GS Yuasa Corp. of 5.95%, and Mazda Motor Corporation of 5.06%.

Fuji Heavy Industries gained after Morgan Stanley upgraded the stock to “equalweight” from “underweight”, citing rising demand and a weakening yen.

Mazda Motor Corporation also advanced after brokerage CLSA raised its rating to “outperform” from “underperform”.

Exporters also gained as the yen fell to a three-month low at 107.76 against the dollar on expectations that the U.S. will increase its interest rates in the wake of soaring inflation. Bridgestone Corp. gained 2.57% and Nikon Corp. advanced 4.69%.

Daiwa House Industries led decliners in the Nikkei 225 index shares with a drop of 5.76% followed by losses in Nippon Light Metals of 3.72%, in Inpex Holdings of 3.01%, in Mitsui OSK Lines of 2.64%, and Kawasaki Kisen of 2.49%.

Night Light Metal and other commodity stocks declined on a rising dollar.

Realty stocks fell on expectations that rising inflation will prompt the authorities to increase interest rates. Tokyu Land Corp gained 1.44% and Mitsui Fudosan climbed 1.47% on the news.

World markets review

European stocks traded mixed at mid-day on rising inflation in France and current account deficit in EU27.

The CAC 40 gained 0.43% in midday to 4,781.62. In Germany the DAX 30-index advanced 17.23 points or 0.25% to 6,788.33. Stocks in Switzerland fell as the Swiss Market index retreated 36.27 points or 0.50% to 7,247.94. The FTSE 100 gained 3.20 points or 0.05% to 5,830.50.

In Tokyo Nikkei 225 Index closed higher 162.31 or 1.16% to 14,183.48, in Hong Kong Hang Seng index decreased 47.92 or 0.21% closed to 23,327.60. In Australia ASX 200 index higher 29.80 or 0.55% to close 5,467.30. In Malaysia KL Composite index decreased 1.68 or 0.14% closed to 1,229.28.

In South Korea Kospi Index increased 7.29 or 0.41% to close at 1,781.67, in Thailand SET index closed lower 0.28 or 0.04% to 791.66 and Indonesia JSE Index edged increased 0.97 or 0.04% to 2,374.78. Sensex index in India increased 296.07 or 1.99% to 15,185.32.