WK.49(5th - 9th December 2011)
1
Japanese stocks had a positive start to the week in trading in Tokyo on Monday, helped by more encouraging news from overseas over the weekend. Friday’s US non-farm payrolls report showed that the unemployment rate in November dropped to a 32-month low of 8.6%, improving the outlook for the US economy. And, on Sunday, Italian Prime Minister, Mario Monti, unveiled a €30 billion austerity package that aims to bring the country’s budget back into balance by 2013, raising hopes that European policymakers are at last beginning to take tangible steps to contain the debt crisis in the Euro-zone. The Dollar strengthened on foreign exchange markets, nudging up towards the Y78 level and providing a boost for exporters. Financials also rose. Nomura Holdings added 2.8% and rival, Daiwa Securities, advanced 1.6%. Among automakers, Toyota climbed 2.7%. Camera and medical instruments manufacturer, Olympus, gained 2.3% ahead of a report scheduled for release on Tuesday by an independent panel looking into the cover up of past investment losses by the company’s management. Speculators are betting that the report will not contain any more surprises that would further damage the company. And Daio Paper, another scandal-hit firm, surged 8.1% on expectations that it will be able to file its delayed interim results by December 14 and so avoid a de-listing from the Tokyo Stock Exchange (TSE). The tissue maker’s former chairman, Mototaka Ikawa, was arrested by prosecutors last month after he was found to have diverted in excess of Y10 billion from Daio subsidiaries to his own account. Elsewhere, Fast Retailing, operator of the Uniqlo chain of casual clothing outlets, leapt 4.5% despite saying that same-store sales fell 1% in November from the same month a year ago. This was, however, an improvement over the 4% drop reported in October. And drug-store operator, Matsumoto Kiyoshi, jumped 3.6% following a rating upgrade from Nomura, which cited improved margins at its suburban locations. Overall, the Nikkei average closed up 0.6% at a one-month high of 8,696. The broader Topix index also rose 0.6% to finish at 749. Trading volume was light with only around 1.43 billion shares exchanging hands.
2
Share prices fell in trading in Tokyo on Tuesday after ratings agency, Standard & Poor’s, placed 15 Euro-zone countries, including Germany, France and four other countries that currently hold the top AAA status, on credit watch negative overnight, an unprecedented step that signals a possible downgrade within three months. Any such downgrade would not only heighten concerns about the sovereign debt crisis and its impact on global economic growth but would also raise questions about the ability of the European Financial Stability Facility (EFSF), the bail-out fund charged with safeguarding financial stability in the region, to itself raise money at reasonable rates of interest. Moreover, the S & P decision came just hours after a meeting between French President, Nicolas Sarkozy, and German Chancellor, Angela Merkel, at which they agreed on the need for a basic treaty change within the European Union (EU) to place strict budget restrictions on Euro-zone governments. Exporters were sold. Consumer electronics and entertainment giant, Sony, slid 1.9% and Toyota, another market bellwether, shed 2.1% after the automaker said that it would announce a revised full-year earnings forecast on Friday to take account of the impact of the recent flooding in Thailand. Nissan also slipped 1.6% although Honda managed to eke out a 0.1% gain. Komatsu, the world’s second-biggest manufacturer of earth-moving equipment after Caterpillar of the US, dropped 2.7% and industrial robot maker, Fanuc, declined 1.2%. Scandal-plagued Olympus maintained its recent strong run and surged another 9.1% on continued speculation that it will successfully avoid being de-listed from the Tokyo Stock Exchange (TSE) after the independent panel investigating the company released its report into the cover-up of past investment losses. This found no evidence of involvement by organized crime but did recommend replacing all directors and pursuing legal action against former executives implicated in the loss-hiding scheme. Elsewhere, Meiji Holdings plunged 9.7% on news that traces of radioactive caesium have been found in infant milk formula produced by the company. Meiji confirmed the report but said the contamination posed no health risk. The Nikkei average closed down 1.4% at 8,575 while the Topix index also lost 1.4% to finish at 738. Trading volume was higher than Monday but remained fairly thin with fewer than 1.6 billion shares exchanging hands.
3
Optimism that Europe is finally about to come up with convincing steps to help resolve the region’s debt crisis propelled stocks upwards in trading in Tokyo on Wednesday. Many investors are expecting the European Central Bank (ECB) to cut interest rates on Thursday and European leaders to move towards tighter integration of Euro-zone fiscal policy at their summit meeting on Friday. Exporters rebounded from their losses of the previous day. Sony leapt 5.9% and Toyota added 2.5%. Shipping companies rose on news that Mitsui OSK Lines, Japan’s biggest sea cargo carrier, has agreed in principle with four foreign ship-owners to jointly operate very large crude carriers (VLCCs) from February 2012 to better compete in a difficult freight tanker market. Mitsui OSK Lines soared 11.2% while rival, Nippon Yusen, also surged 7.9% and Kawasaki Kisen leapt 7.3%. Elsewhere, however, Olympus shed 5.2% as speculators exited the stock now that the independent panel investigating the accounting scandal at the camera and medical instruments manufacturer has released its report, judging that there is no further mileage to be gained. And Meiji Holdings jumped 5.2%, recovering about half the ground lost the previous day after traces of radioactive caesium were found in infant milk formula produced by the company. Overall, the Nikkei average closed up 1.7% at a fresh one-month high of 8,722. The more comprehensive Topix index was also ahead 1.6% to finish at 750. Trading volume was again higher with over 1.8 billion shares exchanging hands.
4
Government figures released Thursday revealed that Japan’s core machinery orders, a leading indicator for corporate capital spending, fell a seasonally-adjusted 6.9% in October, the second straight month-on-month decline following an 8.2% drop in September. This was the first time in nearly two years that machinery orders have contracted for two consecutive months and emphasized the very uncertain outlook for the Japanese economy. On the Tokyo Stock Exchange (TSE), nervous investors unloaded stocks. Camera and precision equipment maker, Nikon, shed 2.4% and electronic components manufacturer, Kyocera, slid 1.7%. Consumer electronics giant, Panasonic, slumped 2.9% after it was ordered by the European Union (EU) to pay a combined fine of €161 million together with three European companies for operating a cartel over sales of refrigeration compressors between April 2004 and October 2007. But scandal-hit Olympus jumped 4.4% on hopes for management reform now that its current board members are all expected to resign at its next shareholders meeting to take blame for the long-running cover-up of investment losses. Among automakers, Toyota was off by 1% and Nissan slipped 2.1%. Elsewhere, Tokyo Electric Power (TEPCO) plunged 11.3% on reports that the government is considering an effective nationalization of the utility. TEPCO, the operator of the crippled Fukushima nuclear power plants, faces the prospect of massive compensation payments and clean-up costs and is increasingly likely to see liabilities exceed assets within the next financial year. The Nikkei average closed down 0.7% at 8,665 while the Topix index slid 0.6% to finish at 745. Trading volume was moderate with about 1.74 billion shares exchanging hands.
5
Share prices fell in trading in Tokyo on Friday after the European Central Bank (ECB) cut its interest rate by 0.25% as expected overnight but disappointed investors by stopping short of committing to more purchases of Euro-zone government bonds. Markets had been hoping that the ECB would move more aggressively to play a greater role in resolving the region’s debt crisis, which continues to weigh heavily on the outlook for the global economy. Leaders meeting at the European Union (EU) summit also failed to secure backing from all 27 member states for revisions to the EU treaty although the 17 Euro-zone members did agree a new fiscal pact to enforce tougher budget discipline. On the Tokyo Stock Exchange (TSE), exporters were sold. Sony tumbled 3.3% and rival, Panasonic, slumped 2.8%. Financials, too, were lower. Nomura Holdings shed 3% and Daiwa Securities dropped 3.4%. Elsewhere, however, synthetic textiles manufacturer, Teijin, rose 1.2% on news that it plans to work with General Motors of the US to jointly develop carbon fiber automobile components. And house builder, Sekisui House, gained 2.2% on saying that its net profits for the nine months through to the end of October were up 83% over the same period a year ago. Overall, the Nikkei average closed down 1.5% at 8,536 to register a 1.2% loss for the week. The broader Topix index slipped 0.9% to finish at 738. Trading volume was high with nearly 2.6 billion shares exchanging hands thanks to settlement of December futures and options.
