Japan Financial Shares Gain on Fitch Comments; Shipper Slump

By Jason Clenfield and Toshiro Hasegawa

June 4 (Bloomberg) -- Japanese financial shares climbed after Fitch Ratings affirmed debt ratings on the U.S. and U.K., easing concern borrowing costs will increase. Electronics makers fell on reports the U.S. service sector and job market worsened.

Nomura Holdings Inc., Japan’s top brokerage, jumped 4.2 percent. T&D Holdings Inc., the nation’s largest listed insurer, surged 6.9 percent after UBS AG rated it a “buy.” Panasonic Corp., the world’s No. 1 maker of plasma televisions, dropped 1.5 percent, while Canon Inc. slipped 1 percent.

The Nikkei 225 Stock Average fell 25.62, or 0.3 percent, to 9,716.05 at the 11 a.m. lunch break in Tokyo, set to break a six-day winning streak. The broader Topix index reversed losses, adding 0.66, or 0.1 percent, to 915.16, with almost two shares rising for every two that declined.

“If you can allay concern that the U.S. debt-rating will be downgraded, that’ll help invite investors back into the market,” said Naoki Fujiwara, who oversees about $6.1 billion at Shinkin Asset Management Co. in Tokyo. “Long-term U.S. interest rates impact the cost of raising money domestically, so there’s some relief about the outlook for borrowing costs for banks and insurance companies.”

The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the U.S. economy, climbed less than forecast to 44 from 43.7 in April. Economists predicted the index would rise to 45. A separate report showed U.S. companies cut 532,000 workers from payrolls.

Fitch Ratings

Japanese corporations cut spending for an eighth-straight quarter as a slump in global demand eroded profits, leaving less money for plant and equipment, the Ministry of Finance said today. Profits tumbled 69 percent.

Japanese shares pared losses and the yen weakened after David Riley, Fitch’s head of sovereign ratings, said at a conference in Sydney that the ratings agency has confidence in the ability and track record of the U.S. and U.K. “to do the right thing.”

“The fact that they’re committed to the AAA rating will help keep interest rates low,” said Masayoshi Yano, a senior market analyst at Meiwa Securities Co. in Tokyo. “And because that’s a positive for the housing market, it’s helped relieve concern that share prices have risen too high,” Yano said.

Nomura jumped 4.2 percent to 770 yen, reversing a drop of 0.8 percent. Mitsubishi UFJ Financial Group Inc. also bounced back from losses, adding 1.6 percent to 624 yen.

Insurers Jump

T&D surged 6.5 percent to 2,790 yen after UBS initiated coverage of the insurer with a “buy” recommendation and gave the shares a 12-month price estimate of 3,400 yen. Sompo Japan Insurance added 2.8 percent to 71 yen. Brokerages and insurance companies were the biggest gainers among the Topix’s 33 industry groups.

Panasonic dropped 1.5 percent to 1,355 yen, while Canon, the biggest maker of digital cameras globally, lost 1 percent to 3,130 yen. Mazda Motors Corp. retreated 2 percent to 252 yen.

“Shares of electronics and automakers have overheated,” said Mitsushige Akino, who oversees about $632 million at Ichiyoshi Investment Management Co. in Tokyo. “That’s true for shipping and resource-related companies too,”

Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipper, fell 3.5 percent to 440 yen. Shares of the company have risen in seven of the past eight trading days and have gained 12 percent in the past month, as commodities prices and transport fees surged. Rival Nippon Yusen K.K. declined 3.7 percent to 448 yen. Shipping lines had the sharpest loss among Topix groups.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net.