Japanese Stocks Rise on Bank Merger Speculation; Chugai Surges

By Patrick Rial

April 27 (Bloomberg) -- Japanese stocks rose, led by banks and drugmakers, on speculation two local lenders will merge and an outbreak of swine flu will spur sales of antiviral treatments. Indexes pared gains as earnings fell at shipping lines.

Shinsei Bank Ltd. and Aozora Bank Ltd. soared more than 14 percent after people with knowledge of the matter said the companies are in merger negotiations. Chugai Pharmaceutical Co., which sells the antiviral drug Tamiflu, jumped 14 percent after swine flu cases prompted the U.S. to declare a public health emergency. Japan Airlines Corp., Asia’s biggest carrier, sank 4 percent on speculation the disease will deter travel to other countries. Mitsui O.S.K. Lines Ltd. led shipping companies lower after forecasting a 69 percent slide in profit for this year.

The Nikkei 225 Stock Average added 18.35, or 0.2 percent, to close at 8,726.34 in Tokyo, after swaying between gains and losses eight times. The broader Topix index climbed 3.05, or 0.4 percent, to 833.10.

“Financial institutions seem to have trouble making money so it’s a good idea for them to move forward with mergers and acquisitions,” said Soichiro Monji, chief strategist at Tokyo- based Daiwa SB Investments Ltd., which manages $53 billion. “One of the risks for the market is negative surprises in corporate earnings announcements.”

The Nikkei is headed for a 7.6 percent gain in April, the steepest monthly advance in a year, as first-quarter profits at U.S. banks and expanded stimulus plans lifted optimism the global recession is easing. The gauge has slipped in the past two weeks as companies including JFE Holdings Inc. and Sumitomo Realty & Development Co. posted lower profits.

Japan’s Cabinet Office said today the nation’s gross domestic product will shrink a record 3.3 percent this fiscal year as exports and corporate spending tumble at an unprecedented pace.

Swine flu cases in the U.S. and Mexico led the Obama administration to declare a public health emergency and release stockpiles of medicine. Japan’s health ministry is checking supplies of influenza treatments and screening travelers from Mexico at airports for fever, Yoshio Namba, head of the office for pandemic influenza, said at a briefing in Tokyo yesterday. More than 80 people have died from the disease.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net