Japan’s Nikkei Rises, Led by Oil Producers; Airline Shares Fall

By Masaki Kondo

Jan. 19 (Bloomberg) -- Japan’s Nikkei 225 Stock Average gained, led by oil producers as higher crude prices boosted their earnings prospects, while airlines retreated on higher fuel costs.

Inpex Corp., Japan’s largest oil and gas explorer, climbed 2.2 percent after crude prices advanced for the first time in three days on Jan. 16. Mitsubishi Estate Co. added 2.3 percent after UBS AG said there is “little risk” associated with real- estate companies’ earnings. Honda Motor Co., which gets more than half its profit from North America, climbed 4 percent after the local currency weakened against the dollar. All Nippon Airways Co. sank 2.9 percent after prices for jet kerosene jumped in Singapore.

“Current oil prices are cheap and resources shares are probably worth buying for investors seeking long-term returns,” said Mitsushige Akino, who oversees the equivalent of $605 million at Tokyo-based Ichiyoshi Investment Management Co. “These shares will likely lead a gain in the market once the global economy bottoms out and starts recovering.”

The Nikkei climbed 26.70, or 0.3 percent, to close at 8,256.85 in Tokyo. The broader Topix index fell 0.16, or less than 0.1 percent, to 817.73, with almost the same number of stocks declining and rising. The value of stocks traded in Tokyo fell to the lowest level since Jan. 5 when the market opened only for the morning trading.

Oil Gains

The Nikkei tumbled by a record 42 percent last year when the collapse of the American mortgage market triggered a global financial crisis, forcing the most bankruptcies among Japan’s listed companies since World War II. The benchmark’s members pay annual dividends worth 2.6 percent of their share prices, more than twice the returns on 10-year government bonds.

“The dividend yield is still attractive,” Shoji Hirakawa, Tokyo-based chief strategist for Japanese equities at UBS, wrote in a report dated Jan. 16. “Even if profit falls sharply, dividend growth is often maintained in the initial year of an earnings deterioration phase.”

Inpex jumped 2.2 percent to 709,000 yen, leading a gauge of mining companies to the biggest jump among 33 industry groups on the Topix, followed by real-estate companies. Mitsubishi Corp., Japan’s largest trading company by market value, leapt 2.6 percent to 1,290 yen, and closest competitor Mitsui & Co. rose 2.1 percent to 922 yen.

Crude oil for February delivery jumped 3.1 percent, the most since Jan. 5, to $36.51 a barrel on Jan. 16 before declining as much as 1.6 percent today. A $1 price change in a barrel of Brent oil alters Inpex’s annual net income by 2.2 billion yen ($24 million), the company said in May, while Mitsubishi and Mitsui both earn more than half their profit from commodities.

‘Little Risk’

Mitsubishi Estate, the nation’s second-largest developer, jumped 2.3 percent to 1,273 yen, while market leader Mitsui Fudosan Co. gained 1.8 percent to 1,254 yen. Sumitomo Realty & Development Co. added 1.4 percent to 1,154 yen.

“We see little risk at this point that operating profit for the major real estate companies will decline significantly more than 10 percent year on year,” Toshihiko Okino, an analyst for UBS, wrote in a note to clients dated Jan. 16. “The competitiveness of rental property portfolios of major real estate firms is high.”

Honda, Japan’s second-biggest automaker, climbed 4 percent to 2,090 yen, contributing the most to the Topix’s gain. The yen depreciated to as much as 91.30 today, the weakest level since Jan. 9, from 90.46 at the close of stock trading on Jan. 16. A weaker yen boosts the value of overseas sales for Japanese companies when converted into local currency.

Nuclear Power

Suzuki Motor Corp., the nation’s second-largest minicar maker, gained 2.8 percent to 1,305 yen. Tatsuo Yoshida, an analyst for UBS, kept his “buy” rating on the stock on Jan. 16, saying the share price is lower than his 12-month estimate of 1,500 yen.

Toshiba Corp., Japan’s biggest supplier of nuclear reactors, soared 6.5 percent to 411 yen and was the most actively traded stock in Tokyo. The company will build two nuclear-power plants in Texas worth as much as 800 billion yen for Princeton, New Jersey-based NRG Energy Inc., the Yomiuri newspaper said today.

All Nippon, the nation’s second-biggest airline, fell 2.9 percent to 333 yen, posting its steepest decline since Dec. 19. Japan Airlines Corp., Asia’s largest carrier, lost 1.5 percent to 201 yen. The price of jet fuel, the airlines’ largest expense, rose 3.8 percent to $61.75 a barrel in Singapore on Jan. 16. Akira Suzuki, an analyst for Tokai Tokyo lowered his rating on All Nippon to “below average” from “neutral” on the same day.

Nikkei futures expiring in March inched up 0.1 percent to 8,250 in Osaka and gained 0.5 percent to 8,280 in Singapore.

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