By Patrick Rial and Masaki Kondo
Nov. 21 (Bloomberg) -- Japan stocks rose, reversing a morning drop and paring a weekly decline, after investors pounced on shares trading near the lowest in almost three decades and a newspaper reported Citigroup Inc. may be sold.
Mitsui Fudosan Co., Japan's biggest developer, rebounded 11 percent after a 14 percent slide yesterday amid speculation funds bought shares as the Nikkei 225 Stock Average approached a 26- year low. Sumitomo Mitsui Financial Group Inc. rose 8.4 percent on optimism a merger between Citigroup and a rival will help shore up the financial system. Sumitomo Metal Mining Co., Japan's biggest nickel producer, soared 16 percent after announcing plans to buy back shares.
``Cheap valuations are spurring domestic investors and pension funds to buy into the market,'' said Yoshihiro Ito, a senior strategist at Okasan Asset Management Co., which oversees about $9.3 billion.
The Nikkei 225 climbed 207.75, or 2.7 percent, to close at 7,910.79 in Tokyo, reversing a 3.9 percent tumble in the morning session that brought the gauge within 243 points from the lowest close since 1982. The broader Topix index gained 20.41, or 2.6 percent, to 802.69. The Nikkei lost 6.5 percent on the week, while the Topix declined 5.2 percent.
The Nikkei has fallen by 48 percent this year as the credit crisis triggered by the collapse of the U.S. housing market prompted banks to tighten lending. Japan will likely have its longest recession in a decade with gross domestic product falling the next two years, according to economists surveyed by Bloomberg.
Citi Sold?
Japanese Finance Minister Shoichi Nakagawa said today the government is considering how to counter the slump in the stock market and ``would like to respond as soon as possible.''
Citigroup, which experienced a record 26 percent drop in its share price yesterday, is considering selling off assets, or the whole company, the Wall Street Journal reported, citing people it didn't identify. The company's board of directors will meet later today to discuss options, the report said. Shares of the bank, which reported $20 billion in losses during the last four quarters, have fallen 50 percent this week.
``We've had the Citigroup merger talk since this morning and it seems that's getting a positive reaction as investors see it as the better option compared with bankruptcy,'' said Hiroaki Kuramochi, head of equities at Tokai Tokyo Securities Co. in Tokyo.
Mitsui Fudosan surged 11 percent to 1,191 yen after earlier falling 7.9 percent to the lowest since January 2004. Sumitomo Realty & Development Co., Japan's No. 3 developer, soared 11 percent to 1,154 yen, reversing a 7.6 percent drop.
The 14-day relative strength for the Topix Real Estate Index fell to 27 yesterday, indicating shares are poised to rebound. The group had been the worst performer among the Topix's 33 industry gauges this month and was today's biggest winner.
Low Valuations
Seiko Epson Corp., the world's second-biggest maker of inkjet printers, rose 7.8 percent to 1,323 after earlier dropping to a record low.
The average price to book ratio of stocks on the Topix index declined to 0.88 yesterday, the third-lowest reading ever for the gauge. After declining to a record low of 0.83 on Oct. 27, the Topix staged a six-day, 30 percent rally.
Sumitomo Mitsui, Japan's third-largest listed bank, rose 8.4 percent to 305,000 yen. Mizuho Financial Group Inc., the second- biggest, gained 14 percent to 277,000 yen, its third-sharpest advance in 2008. T&D Holdings Inc., Japan's second-largest publicly traded insurer, swung from a loss of 14 percent to a 14 percent gain, the daily limit for the shares.
The New York Times contradicted the Journal's article on Citigroup saying executives aren't actively exploring a sale or breakup of the U.S. bank, citing two people with direct knowledge of the discussions.
Share Buybacks
Companies that announced share buybacks yesterday also rallied. Sumitomo Metal Mining Co., Japan's biggest nickel producer, jumped 17 percent to 701 yen after saying it would buy back 2.83 percent of its shares. The company, today's biggest winner on the Nikkei, had seen its shares plummet 69 percent in the year through yesterday.
Pronexus Inc., a printer of financial documents, added 9.4 percent to 557 yen after saying it will buy back as much as 2.75 percent of its shares. Geo Corp., an operator of DVD rental stores, surged by its daily limit of 8.9 percent to 61,300 yen, after saying it would buy back up to 5.31 percent of its shares.
Nikkei futures expiring in December added 3.5 percent to 7,950 in Osaka and gained 2.4 percent to 7,895 in Singapore.
To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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