Japan Stocks Rebound From Rout, Led by Discounters, Utilities

By Masaki Kondo

Dec. 3 (Bloomberg) -- Japanese stocks rebounded from yesterday’s plunge after recession-conscious consumers boosted sales at discount retailers and lower oil prices brightened the earnings prospects for utilities.

Fast Retailing Co., Asia’s biggest clothing company, surged by its 10 percent limit after monthly sales jumped to a record. Seven & I Holdings Co., operator of Japan’s largest convenience store chain, climbed 12 percent after Macquarie Securities Ltd. raised its rating on expectations lunch box sales will increase. Tokyo Electric Power Co. gained 4 percent after oil fell for a third session yesterday. Honda Motor Co. led automakers lower after its U.S. sales sank the most in 27 years.

“Consumers are shifting to more affordable goods from higher-priced ones,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “In this economic climate, nobody’s eager to buy pricy stuff like Japanese beef or blowfish.”

The Nikkei 225 Stock Average climbed 140.41, or 1.8 percent, to close at 8,004.10 in Tokyo. The broader Topix index advanced 12.07, or 1.5 percent, to 799.19, with almost three stocks rising for each that fell. Yesterday, both gauges posted the biggest retreat since Nov. 20.

The collapse of the American mortgage market sparked a financial crisis that pushed the U.S., Europe and Japan into the first simultaneous recession in the post-World War II era. Wages fell in October for the first time this year, Japan’s government said this week, while a Labor Ministry survey showed businesses plan to fire about 30,000 temporary and part-time workers.

‘Affordable’ Prices

Fast Retailing soared 10 percent to 10,790 yen. Sales at existing shops surged 32 percent to a monthly record in November on strong sales of winter clothing, the company said yesterday. Nomura Securities Co. raised its rating on the stock to “strong buy” from “buy.”

Seven & I jumped 12 percent to 2,810 yen, making it the Nikkei’s biggest winner, followed by Fast Retailing. Macquarie analyst Duane Sandberg raised Seven & I to “outperform” from “neutral,” saying in a report dated yesterday convenience stores will benefit “as consumers tighten their purse strings and opt for ‘bento lunches’ over dining out.”

ABC-Mart Inc. climbed 6.3 percent to 3,560 yen, the highest close since February 2006. It said same-store sales rose 6.6 percent in November from a year ago, the sharpest gain in three months. Interior goods retailer Bals Corp. surged 11 percent to 145,000 yen after it too said monthly sales increased.

“The company succeeds in offering high-valued products at affordable prices,” Dairo Murata, an analyst at Credit Suisse Group, said about ABC-Mart today by phone. Fast Retailing is a pioneer among discounters, and ABC-Mart is following its path, Murata said.

Defensive Shares

Tokyo Electric, Asia’s largest utility, jumped 4 percent to 2,975 yen, while Okinawa Electric Power Co. advanced 5.5 percent to 6,290 yen. Oji Paper Co., the nation’s biggest user of high- sulfur fuel oil, rose 5.7 percent to 467 yen.

Crude oil futures sank for a third session to $46.96 a barrel yesterday, the lowest close since May 2005. The contract rebounded today. A $1 change in a barrel of crude alters Tokyo Electric’s annual fuel costs by 18 billion yen ($193 million), the company said on Oct. 31.

All 33 industry groups on the Topix have fallen this year, with power generators and papermakers recording the smallest declines, followed by train operators.

“With the bleak outlook for the global economy and the lingering financial crisis, defensive shares like utilities and train operators are appealing,” Hiroichi Nishi, a Tokyo-based equities manager at Nikko Cordial Securities Inc., said in an interview with Bloomberg Television.

U.S. Sales

Honda dived 4.7 percent to 1,797 yen, the lowest close since September 2001. November sales in the U.S., the company’s most profitable market, plunged 32 percent, the steepest decline since 1981, Honda said yesterday. Isuzu Motors Ltd., which is ending U.S. passenger vehicle sales in January, sank 4.4 percent to 108 yen after reporting a 74 percent monthly sales drop in the market.

“The car industry is the heart of the world’s economy, and the slump in U.S. auto sales have showed us how deep and long this global recession will be,” said Mitsubishi UFJ Asset’s Ishigane. “Investors are giving up hope the economy will recover next year.”

Nikkei futures expiring in December added 2 percent to 8,040 in Osaka and gained 1.4 percent to 8,035 in Singapore.

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