Japan's Stocks Rally After Historic Sell-Off; JFE, Tepco Climb

By Masaki Kondo
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Oct. 17 (Bloomberg) -- Japan's stocks rallied as a 23 percent decline in the past month made shares cheap, and investors flocked to companies whose earnings are insulated from an economic slowdown.

JFE Holdings Inc., Japan's second-biggest steelmaker, jumped 6.8 percent after having lost almost two-thirds of its value this year. Tokyo Electric Power Co. gained 6.7 percent after crude oil fell below $70 yesterday for the first time in 14 months. NTT DoCoMo Inc., Japan's largest mobile carrier, surged 7.8 percent after Nikko Citigroup Ltd. said it was a ``defensive'' harbor.

The Nikkei 225 Stock Average climbed 241.01, or 2.9 percent, to 8,699.46 as of 9:43 a.m. in Tokyo, while the broader Topix index rose 29.48, or 3.4 percent, to 894.00. The Nikkei headed for a 4.9 percent gain for this holiday-shortened week, the steepest since Nov. 30, 2007, and following its worst week ever. The Topix was set for a 6.4 percent advance.


``A possible recession has already been priced in once, or even twice,'' Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., said in an interview with Bloomberg Television. ``Sell-offs have crushed cyclical stocks like steelmakers and shipping companies. We're going to a see a technical rebound.''

Yesterday, the Nikkei sank 11.4 percent, the biggest slump since October 1987 and its second-sharpest drop ever, after a record 14 percent gain two days earlier. Concerns that the global economy will fall into a recession overshadowed optimism U.S. and European government plans to shore up banks' capital will avert a collapse of the financial system.

Stimulus Plan

Japan's Economic and Fiscal Policy Minister Kaoru Yosano said yesterday the government will compile an economic stimulus package, its second since August, by the end of the month to support households facing plunging stock values.

JFE jumped 6.8 percent to 2,215 yen, while bigger competitor Nippon Steel Corp. advanced 8 percent to 324 yen. Nissan Motor Co., Japan's third-biggest automaker, rose 4.8 percent to 498 yen as a 36 percent drop in the past month boosted its dividend yield to 8.4 percent.

The broader Topix index lost 23 percent in the past month through yesterday, led by a 43 percent plunge by shipping lines and a 36 percent dive by steelmakers. Stocks on the index had an average dividend yield of 2.41 percent as of Oct. 15, higher than the 1.58 percent yield on 10-year government bonds.

Defensive Plays

Tokyo Electric, Asia's largest utility, climbed 6.7 percent to 2,535 yen, and Kansai Electric Power Co. jumped 7.5 percent to 2,230 yen. Power generators were the biggest winners among 33 industry groups on the Topix.

Crude oil for November delivery fell 6.3 percent to $69.85 a barrel in New York yesterday, the first time oil dropped below $70 since August 2007. The contract rebounded as much as 4.1 percent today.

DoCoMo advanced 7.8 percent to 157,000 yen, and parent Nippon Telegraph & Telephone Corp. rose 6.7 percent to 413,000 yen. KDDI Corp., the nation's second-biggest wireless carrier, gained 5.7 percent to 538,000 yen.

Nikko Citigroup raised its rating on the stocks to ``buy'' from ``hold,'' saying the telecommunications companies were attractive as a ``defensive'' industry amid the deteriorating business environment.

Nikkei futures expiring in December added 5.5 percent to 8,700 in Osaka and gained 5 percent to 8,705 in Singapore.

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