Japan Stocks Rise After China Rate Cut Spurs Oil, Copper Rally

By Masaki Kondo

Nov. 27 (Bloomberg) -- Japan stocks rose, led by resource and shipping lines, on speculation commodities demand will recover after China cut interest rates by the most in 11 years to spur growth.

Mitsui & Co., which gets more than half its profit from energy and metals trading, climbed 7.7 percent after China’s rate cut sent oil and copper prices higher yesterday. Nippon Yusen K.K., Japan’s No. 1 shipping line, gained 6.5 percent after UBS AG recommended investors buy the shares. Panasonic Corp. fell 4.7 percent on a media report the company will cut its profit target.

“If investors are convinced China’s economy can avoid a serious slump, they’ll snap up commodity shares,” said Yoji Takeda, who helps manage about $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. The rate cut “raised expectations authorities there will take more steps to shore up the economy.”

The Nikkei 225 Stock Average climbed 160.17, or 2 percent, to close at 8,373.39 in Tokyo. The broader Topix index advanced 11.81, or 1.5 percent, to 829.03. The value of stocks traded on the Tokyo bourse’s main board tumbled 8.4 percent to 1.22 trillion yen today. That’s the lowest level for a full-day session since July 27, 2005.

The People’s Bank of China yesterday cut its benchmark lending rate by the most since the 1997 Asian financial crisis, less than three weeks after announcing a 4 trillion yuan ($586 billion) stimulus plan. The country is Japan’s biggest trading partner and eclipsed the U.S. as the No. 1 destination for Japanese exports for the first time in July.

Commodities Boost

Credit losses and writedowns at financial companies nearing $1 trillion have prompted central banks and governments to cut interest rates and boost spending to stem a global recession. The European Union yesterday proposed a 200 billion euro ($258 billion) spending package, joining Japan, China and the U.S. in crafting economic stimulus plans.

Mitsui, Japan’s second-biggest trading house by value, climbed 7.7 percent to 781 yen, the steepest jump since Nov. 5. Inpex Corp., the nation’s largest oil explorer, jumped 10 percent to 573,000 yen, extending its gain to a fourth day. Sumitomo Metal Mining Co., the country’s second-largest copper smelter, soared 8.9 percent to 822 yen.

Crude oil for January delivery advanced 7.2 percent yesterday to settle at $54.44 a barrel in New York, paring losses to 63 percent from a record $147.27 on July 11. The contract retreated today. Copper futures rose 2.3 percent.

Shipping Lines

Nippon Yusen leapt 6.5 percent to 491 yen, and Mitsui O.S.K. Lines Ltd., Japan’s second-biggest shipping line, added 7.4 percent to 478 yen. Kawasaki Kisen Kaisha Ltd., the No. 3, advanced 5.2 percent to 365 yen. Jun Harada, a Tokyo-based analyst for UBS, raised his ratings on the companies to “buy” from “neutral,” citing a decline in fuel prices.

Gauges tracking oil explorers and shipping companies were the two biggest gainers among the Topix’s 33 industry groups.

Pacific Holdings Inc. soared by its 400 yen trading limit to 2,620 yen. The real-estate fund operator said it will raise about 47.5 billion yen ($500 million) by selling new shares to a domestic investment vehicle financed by listed Chinese developers. Its shares were lifted to “buy” from “sell” by Nikko Citigroup Ltd.

The transaction “increases the likelihood of Chinese capital flowing into the Japanese real estate market,” Nikko analyst Takehiro Tsuda wrote in a report dated yesterday.

29th Failure

Other real estate shares also advanced. Creed Corp., which has lost 94 percent of its value this year, surged 18 percent to 13,100 yen. Mitsui Fudosan Co., Japan’s biggest developer, jumped 5.2 percent to 1,369 yen. NTT Urban Development Co. surged 10 percent to 90,500 yen.

Twenty-two of 29 bankruptcies among listed Japanese companies this year have been in the real estate and construction sectors, as banks cut back on lending and housing demand declined. Oriental Shiraishi Corp., a builder of bridges and roads, became the 29th failure yesterday, and its shares tumbled 46 percent to 59 yen today.

Panasonic, the world’s largest maker of consumer electronics, sank 4.7 percent to 1,284 yen, making it the third-worst performer on the Nikkei. The company will cut its full-year forecast for operating profit by more than 30 percent, broadcaster NHK said today.

Osaka-based Panasonic said today after the market shut it slashed its annual net income target by 90 percent and operating profit forecast by 39 percent because of the stronger yen and dwindling demand.

“The global economy is still deteriorating and this isn’t the time yet for investors to feel reassured,” Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television. “The thin trading volumes show how unsure people are about the market outlook.”

Nikkei futures expiring in December added 2.8 percent to 8,370 in Osaka and rose 2.5 percent to 8,365 in Singapore.

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