Japan Stocks Climb on Speculation Citi Rescue Will Ease Credit

By Masaki Kondo

Nov. 25 (Bloomberg) -- Japan stocks climbed the most in two weeks, led by real estate and financial companies, on speculation the U.S. government’s rescue of Citigroup Inc. will calm credit market turmoil and foster lending growth.

Mitsui Fudosan Co. and Mitsubishi Estate Co., Japan’s biggest developers, advanced more than 8 percent on expectations banks will loosen lending to real estate companies and after UBS AG recommended buying the stocks. Sumitomo Mitsui Financial Group Inc., the nation’s third-largest listed bank, jumped 11 percent. Inpex Corp., Japan’s largest oil explorer, climbed 7.4 percent after crude jumped the most in three weeks yesterday.

The Nikkei 225 Stock Average rose 413.14, or 5.2 percent, to close at 8,323.93 in Tokyo. The broader Topix index gained 28.89, or 3.6 percent, to 831.58. Both gauges advanced the most since Nov. 10. Japan’s markets were closed yesterday for a holiday.

“The U.S. government has made it clear it won’t allow Citigroup to fail, so investors believe the financial crisis won’t deepen,” said Naoki Fujiwara, who oversees about $720 million at Shinkin Asset Management Co. “Stemming the crisis will help banks recover their financial health, which in turn will free up lending to real estate companies.”

Three-quarters of stocks on the Topix have fallen to below their book value as almost $1 trillion in credit losses and writedowns battered financial firms and dragged the global economy into recession. There have been 28 bankruptcies of publicly traded companies in Japan so far this year, 21 of which were real estate and construction businesses.

Citigroup Rescue

A gauge of real-estate companies, which last week dropped the most since at least 1982, staged the biggest rally among 33 industry groups on the Topix. Mitsui Fudosan jumped 11 percent to 1,321 yen, while Mitsubishi Estate, Japan’s second-biggest developer, climbed 8.9 percent to 1,266 yen. Sumitomo Realty & Development Co., the No. 3, added 13 percent to 1,304 yen.

UBS raised ratings on the three companies to “buy” from “neutral,” saying the stocks had been discounted for an “overly pessimistic scenario.”

Citigroup received a government support package which injects $20 billion of capital and shields the bank from losses on $306 billion of troubled mortgages. The bank’s stock soared 58 percent yesterday, rebounding from last week’s 60 percent plunge.

Sumitomo Mitsui leapt 11 percent to 340,000 yen, making it the biggest contributor to the Topix’s gain. Bigger competitor Mizuho Financial Group Inc. jumped 9.2 percent to 247,700 yen, and Daiwa Securities Group Inc., the nation’s second-largest brokerage, climbed 9.1 percent to 468 yen.

Inpex added 7.4 percent to 520,000 yen, while Sumitomo Metal Mining Co., Japan’s second-largest copper smelter, rose 7 percent to 750 yen. Nippon Mining Holdings Inc., the nation’s biggest producer of the metal, gained 6.2 percent to 257 yen.

Exchange Losses

Crude oil for January delivery climbed 9.2 percent to $54.50 a barrel in New York yesterday, the biggest one-day jump since Nov. 4. Copper futures for March delivery rose 5.9 percent. Oil futures retreated today.

The Nikkei and Topix didn’t match a gain on the Standard & Poor’s 500 Index, which surged 6.5 percent yesterday and capped its biggest two-day rally since 1987. The U.S. government’s intervention at Citibank failed to quell concern more financial companies will need bailouts, said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo.

“The Citigroup rescue revealed how fast bank assets are worsening,” Teraoka said. “Investors can’t yet afford peace of mind.”

Saizeriya Co., which operates an Italian-restaurant chain, plummeted 17 percent to 1,485 yen, its sharpest drop since April 2003 and making it the biggest loser on the Topix today. The company will book losses of about 14 billion yen ($145 million) on foreign-exchange derivates as the local currency appreciated, Saizeriya said on Nov. 21 after markets shut.

Nikkei futures expiring in December added 4.9 percent to 8,340 in Osaka and gained 8.2 percent to 8,330 in Singapore.

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