Nikkei Rises On Second Stimulus Plan

123jump.com Staff
17 Oct, 2008
New York City

Stocks in Japan rose on the expectations that the government will soon release second economic stimulus package. Fall in crude oil prices and the talks of second stimulus package lifted the Nikkei 225 index 2.8%. Electric utilities surged more than 8% and retailers gained.

[R]5:00AM New York, 7:00PM – Stocks in Japan rose on the hopes of a second stimulus package. Electric utilities surged on the fall in crude oil prices.[/R]

Japan stocks continue to trade volatile tracking roller coaster markets in the U.S. Foreign investors in Tokyo drive nearly half the trading volumes and they are net sellers of equities. Long term investors in Japan are still on the side lines as trust, banks and insurance companies believe that stocks are likely to fall further.

Steelmakers, shipping lines and exporters have faced the brunt of the current wave of sell-off. The sharp decline in ship freight index of more than 80% in less than six months has led shippers down 45% in Japan in the last two months.

Fall in crude oil prices and the talks of second government stimulus package lifted the Nikkei 225 index. Electric utilities and retailers rose. A fall in energy prices will help utilities to cut the cost of fuel and a second stimulus package may spur consumer spending.

For the year the benchmark index Nikkei 225 index fell 43%.

Market Sentiment

In Tokyo trading Nikkei 225 increased 2.8% or 235.37 to 8,693.82, rising 5% for the week, and the broader Topix Index soared 3.4% or 29.77 to 894.29.

In the first section of the Tokyo Stock Exchange 22 billion shares worth 1.9 trillion yen were traded and in the second section 411 million shares valued at 2.8 billion yen changed hands.

Of the Nikkei 225 index stocks 183 rose, 39 declined, and 3 were unchanged. Marui Group led advancers in the index shares with a rise of 13.2%.

Japan Working on New Economic Package

Prime Minister Taro Aso told cabinet today to work on the second economic stimulus package. The first package was directed improving the consumer spending and helping small businesses.

Japan''s upper house in parliament yesterday passed a 1.81 trillion yen or $18 billion supplementary budget.

Services Demand Falls 1.4% in August

Japan’s Ministry of Economy Trade and Industry reported today the demand for services fell 1.4% to 109.1 in seasonally adjusted terms in August.

Wholesale and retail trade declined 2.2%; electricity, gas, heat supply and water shed 4.2%; finance and insurance declined 1.1%; transport fell 1.1%; eating, drinking places, accommodations lost 1.3%; medical, healthcare and welfare edged lower 0.6%; and compound serviced declined 2.6%.

Learning support fell 1% in the period.

Industries that contributed to the rise were information technology up 3.1% and communications services increased 0.9%.

Gainers & Losers

Marui Group led advancers in the Nikkei 225 index shares with a rise of 13.24% followed by rises in Obayashi Corp. of 11.29%, in Osaka Gas Co Ltd. of 11.28%, in Yahoo Japan Corp. of 11.17%, and Sumitomo Osaka of 11.11%.

Electric utilities surged on the fall in crude oil prices. Tokyo Electric surged 9% to 2,585 yen, Osaka Gas Company surged 11% to 355 yen and Kansai Electric Power Company soared 8.4%.

Taiyo Yuden led decliners in the Nikkei 225 index shares with a fall of 15.22% followed by losses in JGC Corp. of 12.83%, in TDK Corp. of 9.84%, in Chiyoda Corp. of 8.18%, and Hitachi Construction Machinery of 7.51%.

Hitachi Construction Machinery dropped on concern that the economy will slip into a recession and exports to China and emerging markets are likely to fall.

Shipping lines declined as the Baltic Dry Index, which measures the cost of shipping bulk commodities, fell to a six year low by 6.75% on difficulty in obtaining trade finance and fears of recession. Mitsui OSK Lines dropped 6.74%.

Mitsui & Co and other commodity stocks fell declined as crude oil prices for November delivery fell 6.3% to $69.85 a barrel yesterday. Copper prices fell the most in two year to 4,545 a ton, lead dropped 7.3% to $1,385 a ton, while nickel declined 5.1% to $11,150 a ton.

Posco, Japanese Steelmakers Buy 40% Stake in Namisa

South Korea’s steel making giant reported today that it will ally with its rival Japanese companies to buy a 40% stake in Brazil’s iron ore producer Namisa for an estimated 4 trillion won or $3.9 billion.

Namisa is a subsidiary of Brazil’s third biggest steelmaker Cia Siderurgica Nacional SA.

Nikkei News noted that the Japanese steel makers include Itochu Corp., Nippon Steel Co., Sumitomo Metal Industries, Kobe Steel and Nisshin Steel Co.

Posco spokeswoman Ko Min Jin said the company will hold 6.48% of Namisa valued at $505 million. Jin added that a decision on the transaction will be made on October 21.