Japan Topix Index Rises in Longest Streak in 4 Years on Payouts

By Masaki Kondo and Patrick Rial

March 25 (Bloomberg) -- Japan’s Topix index rose in its longest winning streak in four years, as investor appetite for corporate dividends overshadowed a record plunge in exports.

KDDI Corp., Japan’s No. 2 mobile-phone operator, surged 6 percent before the shares trade without rights to an estimated 5,500 yen dividend tomorrow. JFE Holdings Inc., Japan’s No. 2 steelmaker, gained 4.4 percent as its dividend return is almost three times the yield on government bonds. Panasonic Corp., the world’s largest electronics maker, sank 3.5 percent as slumping demand caused Japan’s shipments to plunge by half last month.

The Topix rose 5.77, or 0.7 percent, to close at 818.49 in Tokyo, extending gains for an eighth day, the longest winning streak since March 2005. The Nikkei 225 Stock Average dipped 8.31, or 0.1 percent, to 8,479.99 after swinging between gains and losses at least 12 times.

“Because they have been underweighting equities or have too much cash, some investors are forced to buy because the market is unexpectedly strong,” said Masayuki Kubota, a senior fund manager who helps oversee $1.7 billion at Tokyo-based Daiwa SB Investments Ltd. “The defensive high-yielders are very attractive, and it’s good to buy before the ex-dividend date.”

Through yesterday, the Nikkei gained 20 percent since reaching a 26-year low on March 10, meeting the technical definition of a bull market. The gauge is poised for a 4.3 percent drop for the first three months of 2009, compared with a 21 percent plunge in the last quarter of 2008.

Dividend Rights

Japan’s exports tumbled 49.4 percent last month from a year earlier as a global recession damped demand for the nation’s cars and electronics. The decline, reported today by the Ministry of Finance, was the sharpest since at least 1980, when the government started to keep comparable data. Economists had estimated a 47.6 percent drop.

Today was the last day investors can get dividend rights from companies whose business year ends on March 31, Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc., said in an interview with Bloomberg Television. Tomorrow, more than 2,800 Japanese companies will trade without rights to a dividend, based on Bloomberg data.

KDDI surged 6 percent to 478,000 yen, the steepest advance since Nov. 25. Tokyo Electric Power Co., Asia’s biggest utility, leapt 4.2 percent to 2,620 yen. KDDI is expected to pay a dividend equivalent to 2.3 percent of its share price, and Tokyo Electric’s dividend yield is forecast at 2.3 percent. JFE, whose dividend yield is estimated at 3.4 percent, climbed 4.4 percent to 2,370 yen. By comparison, the yield on 10-year Japanese government bonds is 1.255 percent.

Defensive Returns

Utilities and telecommunications companies were the biggest winners among 33 industry groups on the Topix. Steelmakers and shipping lines, the third- and fourth-biggest gainers, have an estimated dividend yield of 2.8 percent and 4.4 percent respectively.

“Utilities are typical of so-called defensive stocks that offer comparatively good dividend returns,” Tsuyoshi Nomaguchi, strategist at Daiwa Securities Group Inc., said in an interview with Bloomberg Television.

Panasonic, which is expecting its first loss in six years, slid 3.5 percent to 1,149 yen. Closest rival Sony Corp., which forecast a record operating loss for the year to March 31, lost 2.4 percent to 2,075 yen. Fanuc Ltd., Japan’s top maker of industrial robots, sank 5.4 percent to 6,860 yen.

‘Deep Restructuring’

“We’ll likely see much bigger losses at some electronics makers amid deep restructuring,” said Mitsushige Akino, who oversees the equivalent of $615 million at Tokyo-based Ichiyoshi Investment Management Co. “These companies see the current recession as a chance to pursue long-delayed changes, because few observers will complain even if they stop factories or release workers.”

Central Japan Railway Co. climbed 8.8 percent to 592,000 yen, its largest gain since Aug. 1999. Japan’s largest operator of bullet trains said declines in high-speed rail passengers slowed in March after falling by the most in 14 years last month.

Takeda Pharmaceutical Co. gained 3.3 percent to 3,770 yen after Japan’s largest drugmaker said combination treatment of its diabetes drug Actos and insulin product was approved by Japan’s health ministry.

Nikkei futures expiring in June added 0.4 percent to 8,430 in Osaka and rose 0.3 percent to 8,430 in Singapore.

-- With reporting by Motoko Kakizaki, Yuichi Kato and Kazue Somiya in Tokyo. Editors: Rocky Swift, Sam Waite

To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.