WK.9(28th February - 4th March 2011)
1
Japanese stocks had a positive start to the week in trading in Tokyo on Monday despite oil prices continuing to drift higher on the deteriorating situation in Libya. Figures released by the Ministry of Economy, Trade & Industry (METI) showing that Japan’s industrial production rose for the third straight month in January helped to improve sentiment, and blue-chip exporters benefited from foreign buying as investors adjusted their portfolios at month end. Consumer electronics and entertainment giant, Sony, advanced 0.9% and, among automakers, Toyota added 1.7%. But NEC shed 3.4% after the computer and electronics systems manufacturer suffered a rating downgrade from Goldman Sachs. In the financial sector, reports that Mizuho Financial Group, Japan’s second-largest bank by assets, is planning to buy out minority shareholders in a number of its subsidiaries caused the share prices of the affected units to soar. Investment bank, Mizuho Securities, surged 12.1% while retail broker, Mizuho Investors, leapt 7% and Mizuho Trust & Banking jumped 6%. Even Mizuho Financial itself climbed 1.8% because analysts view the move as a prelude to the banking group taking steps to streamline its various businesses and cut costs. Elsewhere in the banking sector, however, Shinsei slipped 1% on dilution concerns following news that it would issue fresh shares in an effort to bolster its capital by up to Y70 billion. Overall, the Nikkei average closed up 0.9% at 10,624. The broader Topix index was ahead 1% to finish at 951. Trading volume was heavy with over 2.5 billion shares changing hands.
2
Foreign buying pushed Japanese share prices higher again in trading on Tuesday despite mixed economic data and virtual paralysis in the domestic political arena. Employment figures were relatively good with the seasonally-adjusted jobless rate for January remaining unchanged from December at 4.9%. But consumer spending fell 1% year-on-year as household income declined. Investors are keenly aware that the Japanese economy faces very serious problems from an ageing and declining population coupled with a high and growing national debt. At the same time, there is anger and frustration at the seeming inability of the political class to get to grips with the situation. Prime Minister Naoto Kan’s ruling Democratic Party of Japan (DPJ) is currently struggling to pass a budget for the financial year beginning April 2011 against stiff opposition from the Liberal Democratic Party (LDP) and the gridlock has voters even more disillusioned with politics than usual. Indeed, the approval rating of the Kan government has dropped below 20% in the most recent polls, raising doubts about how much longer the Prime Minister, Japan’s fifth leader in less than four years, can stay in power. On the Tokyo Stock Exchange (TSE), exporters were again in favour thanks to a strengthening of the US Dollar back above the Y82 level. But the biggest mover of the day was Shinsei Bank, which reversed its fall of the previous session and surged 7.7% further to a detailed announcement regarding its proposed Y70 billion capital raising that allayed shareholder fears of dilution and instead emphasised the long-term positive aspects of the plan. A rating upgrade from Credit Suisse also helped to reinforce the gains. Elsewhere, Japan’s largest advertising agency, Dentsu, jumped 4.9% after saying that it has signed an agreement with social networking site, Facebook, to represent it and provide sales and marketing support in Japan. The Nikkei average closed up 1.2% at 10,754 while the Topix index climbed 3% to finish at 964. Trading volume was moderate with around 2.2 billion shares changing hands.
3
Japanese stocks suffered their biggest one-day loss for six months in trading in Tokyo on Wednesday with oil prices hitting US$116 per barrel as Libya slid further into turmoil and investors worried that unrest could spread to other areas of the Middle east and disrupt fuel supplies. Chemical and glass makers fell sharply on concerns about higher input prices. Asahi Glass dropped 4.3%, Nippon Electric Glass shed 4.2% and Shin-Etsu Chemical, a world-leading manufacturer of silicon wafers for the semiconductor industry, slumped 3.7%. Among other technology issues, Sharp tumbled 4.8% following a rating downgrade by Morgan Stanley MUFG Securities, which criticised the company’s failure to cut costs. But internet services provider, Yahoo Japan, jumped 3.7% on reports citing knowledgeable sources that Yahoo Inc. in the US is about to exit its Japanese joint venture and is in advanced talks to transfer its 35% stake in Yahoo Japan to Softbank in a deal that could be worth as much as US$8 billion. Softbank, which is Japan’s third-ranked mobile phone network operator and already owns 41% of Yahoo Japan, declined 3.6% while saying that there is no truth to the rumours. Overall, the Nikkei average closed down 2.4% at 10,492 and the more comprehensive Topix index finished 2% lower at 944. Trading volume was again moderate with 2.2 billion shares changing hands.
4
Reports that Libyan leader, Muammar Qaddafi, is in talks with the president of the Arab league and might agree a peace plan proposed by Venezuelan President, Hugo Chavez, to end the crisis in the North African country prompted oil prices to retreat from 29-month highs and led to share prices in Tokyo recouping some of the previous day’s losses in trading in Tokyo on Thursday. Blue-chip exporters, in particular, were in favour. Among automakers, Honda advanced 0.9% and Bridgestone, the world’s biggest tyre manufacturer, added 2.2%. Electronics and heavy machinery conglomerate, Hitachi, rose 1% and Advantest climbed 1.5% on news that it has developed technology for a next-generation, multi-purpose chip tester that will allow semiconductor makers to check a wide range of microchips with a single machine. Energy-related stocks, however, failed to maintain their upwards momentum amid renewed uncertainty about the direction for oil prices. Inpex Holdings, Japan largest oil and gas field developer, was unchanged, although is still ahead 21% since the beginning of the year. The Nikkei average closed up 0.9% at 10,586 and the Topix index gained 0.6% to finish at 949.
5
Overnight gains by US stocks on Wall Street prompted buying of Japanese shares in trading in Tokyo on Friday. Exporters benefited from a sharp rise in the Euro after Jean-Claude Trichet, governor of the European Central Bank (ECB), surprised markets with comments that suggested a possible interest rate hike as early as April. The Euro immediately climbed towards US$1.40 against the Dollar and pushed above Y115 for a four-month high against the Yen. Printer/copier and digital camera maker, Canon, which derives substantial revenues from Europe, advanced 1.8% and precision equipment manufacturer, Nikon, added 1.9%. In the automotive sector, Mazda, which is a popular brand in Europe, jumped 3.5% while Asahi Glass leapt 3.9% and Nippon Electric Glass was ahead 1.3%. But the biggest winner of all was Sumitomo Electric Industries, which soared 8.1% following an announcement that it has developed a new type of rechargeable battery that could be a cheaper alternative to lithium-ion batteries in cars. Overall, the Nikkei average closed up 1% at 10,694. The broader Topix index gained 0.7% to finish at 956. Trading volume was moderate with 2.3 billion shares changing hands, in line with the average for the past week or so.
