Japan Stocks Fall, Led by Commodity Producers, on Oil Decline

By Masaki Kondo

Aug. 5 (Bloomberg) -- Japan stocks fell as declining raw materials prices sent commodities producers lower, overshadowing gains by paper and tire makers.

Inpex Holdings Inc., Japan's largest oil explorer, sank to a six-month low after crude fell below $120 a barrel. Nippon Paper Group Inc. led its peers to a seven-month high on easing concern fuel costs will eat into profits. JFE Holdings Inc., the nation's second-largest steelmaker, tumbled the most in four months on speculation demand from shipbuilders and China is slowing.

``The market changes so rapidly that it's more or less impossible for investors to buy and hold promising stocks for the long term,'' said Hideo Arimura, who oversees the equivalent of $1.9 billion at Mizuho Asset Management Co. in Tokyo. ``Nobody can foresee what lies in store for the oil market.''

The Nikkei 225 Stock Average declined 18.52, or 0.1 percent, to 12,914.66 in Tokyo, after swinging between gains and losses nine times. The broader Topix index dipped 0.54, or less than 0.1 percent, to 1,247.71. Seventeen of 33 industry groups on the Topix fell.

Crude oil yesterday dropped 3 percent to the lowest since May 5, as Tropical Storm Edouard will avoid most offshore production facilities in the U.S. Gulf Coast as it approaches Texas. The contract was recently at $118 a barrel.

Inpex tumbled 4 percent to 985,000 yen, the lowest close since Feb. 8. Sumitomo Corp., Japan's third-largest trading company by value, dropped 3.8 percent to 1,294 yen. Sumitomo Metal Mining Co., the nation's second-biggest copper producer, sank 3.7 percent to 1,231 yen after copper prices fell to a six- month low.

Bear Market

A gauge of 117 energy producers in the MSCI World Index slipped 3.1 percent yesterday, bringing its decline from a May record to 20 percent, the common definition of a bear market. A measure of mining, farm and chemical companies dropped 3.3 percent, pushing its retreat from an all-time high to 21 percent.

JFE tumbled 7.2 percent to 4,390 yen, the biggest decline since March 7 and bringing its four-day plunge to 19 percent. Nippon Steel Corp., Japan's biggest maker of the alloy, slumped 4.9 percent to 526 yen. The Topix Iron & Steel Index fell 4.8 percent to the lowest since April 14, and contributed the most to the Topix's decline.

Cancelled orders from South Korean shipbuilders last week raised concerns faltering global growth will slow demand for vessels, hurting steel demand. A slowdown in the property market may drag down steel prices in China, the Taipei-based Commercial Times reported today, quoting a report from the China Iron & Steel Association.

Seven Gallons a Tire

Bridgestone Corp., the world's biggest tiremaker, jumped 3.5 percent to 1,715 yen, the biggest gain since July 24. Sumitomo Rubber Industries Ltd., which sells Dunlop and Falken-branded tires, rose 4.1 percent to 821 yen. About seven gallons of oil are required to produce a car tire, according to the Rubber Manufacturers Association.

Nippon Paper surged 13 percent to 321,000 yen, the sharpest jump since its March 2001 listing and making it the biggest winner on the MSCI World Index. The company posted a 41 percent decline in first-quarter net income.

The drop in oil ``takes a lot of weight off the company and they're managing to get price hikes through,'' said Nicholas Smith, director of equity sales at HSBC Holdings Plc in Tokyo. ``There's a certain amount of short covering going on.''

Rival Oji Paper Co., the nation's biggest user of high- sulfur fuel oil, jumped 4.4 percent to 576 yen.

Orix Corp., Japan's largest non-bank financial company, added 2.6 percent to 15,070 yen, while credit-card provider Credit Saison soared 11 percent to 2,330 yen, posting the third- biggest gain among members on the Nikkei.

Merger Talks

Orix and Credit Saison may reach an agreement next month that would unite Orix's leasing and real-estate operations with Credit Saison's consumer-finance business, the Nikkei reported today. The companies denied the report.

Nippon Suisan Kaisha Ltd., a seafood processor, plunged 16 percent, the most on record, to 432 yen. The company today reported its first quarterly net loss since it started disclosing quarterly earnings in 2004, according to figures gathered by Bloomberg. Higher fuel prices boosted costs to run fishing boats, the company said during stock trading.

Among Topix-listed companies reporting quarterly results in the month to yesterday, 59 percent posted a decline in net income, according to data compiled by Bloomberg.

Nikkei futures expiring in September slipped 0.2 percent to 12,920 in Osaka and lost 0.1 percent to 12,930 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.