Tokyo Indexes Retrace Regional Gains

123jump.com Staff
22 Jul, 2008
New York City

Japan stock indexes, a day after closure of markets, rose catching up with global markets rise in the U.S. and in the region. Financials rallied, despite continued string of losses at U.S. banks. However, lower than expected losses at banks bolstered enthusiasm for financial stocks. Tech stocks fell after weaker than expected earnings outlook at Texas Instruments and Apple Inc.

[R]5:00AM New York, 7:00PM Tokyo - Corporate loan demand declines in July. Chugai profit drops. Nikon falls on weak tech stocks.[/R]

Japan market averages rose spurred by rising commodity stocks and elevated futures prices oil. Crude oil futures rose as a storm in the Gulf of Mexico headed in the direction of oil installations in Mexico and Texas. Base metal prices rose as well.

Market Sentiment

In Tokyo trading Nikkei 225 advanced 2.98% or 381.26 at 13,184.96, and the broader Topix Index increased 2.8% or 35.31 at 1,287.74.

In the first section of the Tokyo Stock Exchange 7.6 billion shares valued at 764 billion yen were traded and in the second section 148 million shares worth 2.2 billion yen changed hands.

The Tokyo exchange temporarily suspended trading in Japanese government bond futures, Topix index futures and all options due to a systems failure, but trading later resumed in the afternoon.

Of the Nikkei 225 stocks 210 rose, 13 declined, and 2 were unchanged. Itochu Corp. led advancers in the index shares with a rise of 8.59% after crude oil prices rose above $130 a barrel.

Corporate Loan Demand Slumps in July

The Bank of Japan reported on its Web site today in a survey of lending officer at large banks that demand for loans from firms declined to minus 14 in July from minus 2 in April. Loan demand from local government and households eased to 17 from 29 and 3 from 1 respectively.

In particular, demand for loans from large firms slipped to minus 4 from 4, while medium-sized companies declined to minus 8 from 1 and small companies plunged to minus 14 from minus 4 in the period under review.

For manufacturing companies demand for loans from large companies also fell minus 1 from 3 and medium sized companies slid to minus 2 from minus 8. Loan demand for small manufacturing firms slumped to minus 12 from minus 5.

Also the central bank noted that demand from non-manufacturing large firms shed to minus 4 from 2 in the review period, while medium sized companies tumbled to minus 7 from 2. Small non-manufacturing firms edged down to minus 16 from minus 4 in April.

In addition, demand for housing loans from households advanced to 4 in July from 2 in April and demand for consumer loans rose to 1 from minus 3.

Japan Unlikely to Enter Stagflation

The Nikkei News reported on its Web site today that the Japanese government said the economy is unlikely to slip into stagflation as “slow wage growth is preventing high oil and commodity prices from causing rises in those of other goods.”

Gainers & Losers

Itochu Corp led advancers in the Nikkei 225 index shares with a rise of 8.59% followed by increases in NSK Ltd of 8.27%, in GS Yuasa Corp of 7.84%, in Sumitomo Corp. of 7.44%, and Furukawa Electric of 7.30%.

Itochu Corp gained as oil prices rebounded to above $130 a barrel after inconclusive talks between Iran and Western powers over the former’s nuclear program and as a storm entered the Gulf of Mexico.

Commodity stocks also increased after metal prices jumped. Gold rose 0.3% to $968.70 an ounce, zinc increased 2.2%, copper surged 0.4 % and nickel climbed 0.7%.

Mitsui & Co edged up 6.63%, Toho Zinc spiked 5.81% and Nippon Mining House increased 5.92% as a result.

Heiwa Real Estate led decliners in the Nikkei 225 index shares with a fall of 2.82% followed by losses in Nikon Corp of 2.45%, in Yahoo Japan Corp of 1.70%, in Mitsumi Electric Co of 1.46%, and Chugai Pharmaceutical Co of 0.92%.

Nikon Corp dropped as Apple Inc forecasted that lower than expected earnings in the next quarter, while Texas Instruments forecasted third quarter earnings of 41 cents per share to 47 cents per share, lower than market expectation of 51 cents per share.

In addition, Nomura Holdings Inc. cut its rating on Japan''s semiconductor-manufacturing equipment industry to “neutral”'' from “bullish.”

Chugai Pharmaceutical Co slid after first half profit dropped 10% to 18.9 billion yen from 21.1 billion yen a year ago on declining sales of Tamiflu and the government’s promotion of generic drugs.

Chugai Profit Falls 10%

Chugai Pharmaceutical Co reported today that first half profit declined from 21.1 billion yen from a year ago to 18.9 billion yen on lower sales on Tamiflu and after the drug maker severed its ties with Sanofi-Aventis SA.

Tamiflu sales declined 93% to 1.6 billion yen after the Japanese government completed its plans for stockpiling the drug against a pandemic.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 381.26 or 2.98% to 13,184.96, Hang Seng index in Hong Kong decreased 5.42 or 0.02% closed to 22,527.48. ASX 200 index in Australia decreased 6.20 or 0.12% to close 5,005.60. The KL Composite index in Malaysia increased 6.09 or 0.55% closed to 1,109.57.

The Kospi Index in South Korea decreased 1.69 or 0.11% to close at 1,561.23, SET index in Thailand closed lower 5.15 or 0.75% to 682.15 and JSE Index in Indonesia increased 17.69 or 0.81% to 2,212.75. The Sensex index in India increased 254.16 or 1.84% to 14,104.20.