Japan's Stocks Surge Most in 5 Months on U.S. Lender Takeovers

By Masaki Kondo

Sept. 8 (Bloomberg) -- Japan's stocks jumped the most in five months, led by banks, after the U.S. government took control of mortgage lenders Fannie Mae and Freddie Mac, boosting confidence turmoil in global financial markets will ease.

Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., Japan's biggest listed banks, jumped more than 12 percent, leading a gauge of banks to the sharpest gain in 16 years. Smaller rival Resona Holdings Inc. surged 11 percent after saying it will buy back shares. Brokerage Nomura Holdings Inc. climbed 9.7 percent on a newspaper report it may bid for a stake in U.S. brokerage Lehman Brothers Holdings Inc.

The Nikkei 225 Stock Average climbed 412.23, or 3.4 percent, to close at 12,624.46 in Tokyo. The broader Topix index added 45.57, or 3.9 percent, to 1,216.41. Both indexes rose the most since April 2, and all but three of 33 Topix industry groups rose.

The Treasury Department will buy up to $100 billion of senior-preferred stock in Fannie Mae and Freddie Mac, the biggest U.S. mortgage lenders, to maintain their positive net worth.

``Had the U.S. mortgage-financing companies failed, it would have triggered a substantial financial crisis across the globe,'' said Naoki Fujiwara, who oversees about $720 million as chief fund manager at Tokyo-based Shinkin Asset Management Co. The takeovers ``have eliminated concerns among investors and boosted confidence the financial market will stabilize.''

The credit crisis has wiped out more than $17 trillion in equity value globally as the U.S. housing recession crimped worldwide economic growth. Investors worried a collapse of Fannie and Freddie, which hold more than $1.5 trillion in assets and almost the same amount of debt, would spark further losses at financial institutions.

Japan's three biggest banks held a total of 4.7 trillion yen ($43 billion) in debt securities issued by U.S. government- related mortgage financers including Fannie Mae and Freddie Mac as of March 31, according to the banks. Banks and consumer lenders, the worst-performing groups since the Topix's June 4 high this year, were today's biggest winners.

Nikkei futures expiring in September added 3.4 percent to 12,620 in Osaka and gained 3.9 percent to 12,630 in Singapore.

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