By Masaki Kondo
June 17 (Bloomberg) -- Japanese stocks gained amid speculation investors are taking advantage of a two-day drop to buy shares cheaply. Trading companies declined after metals and oil fell for a third day.
Kawasaki Heavy Industries Ltd., a machinery maker that’s lost 5.9 percent in the past three sessions, jumped 5.1 percent. Sumitomo Forestry Co. surged 11 percent as Morgan Stanley upgraded the homebuilder. DA Office Investment Corp. was set to surge after the Nikkei newspaper said Daiwa Securities Group Inc. plans to invest in the real estate investment trust. Mitsubishi Corp., a trading company that gets more than half its profit from commodities, lost 1.4 percent.
“Investors’ appetite for bargain hunting is surprisingly strong,” said Naoki Fujiwara, who oversees about $3.7 billion at Shinkin Asset Management Co. “We can’t expect a full recovery in commodity prices until demand starts to pick up.”
The Nikkei 225 Stock Average rose 39.09, or 0.4 percent, to 9,791.97 at the 11 a.m. trading break in Tokyo, reversing an early decline. The broader Topix index added 4.01, or 0.4 percent, to 918.77, with two stocks advancing for each that sank.
The Nikkei has lost 3.8 percent in the past two days and is set for the first weekly decline since the five days ended May 22. Companies on the gauge traded at 44.5 times their estimated net income for this fiscal year, almost three times as costly as stocks on the U.S.’s Standard & Poor’s 500 Index.
Kawasaki Heavy, Japan’s No. 2 maker of heavy machinery, jumped 5.1 percent to 267 yen, snapping a three-day drop and making it the Nikkei’s fourth-biggest winner. Sanyo Electric Co., Japan’s biggest maker of rechargeable batteries, jumped 6.6 percent, nearly offsetting a three-day, 6.9 percent slump.
Tax Breaks
Sumitomo Forestry added 11 percent to 776 yen in Osaka trading, while Sekisui House Ltd. jumped 4.4 percent to 994 yen. Morgan Stanley raised the stocks to “overweight” and lifted its outlook on Japan’s real estate sector to “attractive,” saying home orders probably bottomed in the first quarter and should benefit from tax breaks.
JS Group Corp., a maker of doors and windows, added 2.7 percent to 1,511 yen, and Rinnai Corp., which makes home gas appliances, rose 2 percent.
“We believe the expanded gift tax exemption expected to be enacted this month will boost orders for homebuilders as well as housing starts,” Morgan Stanley analyst Hiroko Kubota wrote in a report dated yesterday.
REIT Investment
DA Office wasn’t traded as orders to buy outnumbered those to sell. Daiwa Securities, Japan’s No. 2 brokerage, will buy about 13 percent of the REIT for 10 billion yen ($104 million), Nikkei reported today. Daiwa Securities rose 1.2 percent.
Stocks also rose as Fitch Ratings Ltd. said it will maintain Japan’s sovereign debt rating at AA- even after the government abandoned its goal of balancing the budget by 2011.
“We maintain a stable outlook on Japan’s ratings, suggesting there will be no change in the coming year,” James McCormack, head of Asian sovereign ratings at Fitch, wrote in an e-mailed reply to questions.
Mitsubishi, Japan’s biggest trading house by value, retreated 1.4 percent to 1,854 yen, while closest rival Mitsui fell 1.5 percent, extending its decline to a third day.
Copper prices fell 1.4 percent yesterday after the Federal Reserve said factory output sank for a seventh month in May. In London, a gauge of six metals dipped for a third day, the longest losing stretch since Feb. 12. Crude oil also fell for a third session.
Nikkei futures expiring in September added 0.2 percent to 9,790 in Osaka and gained 0.2 percent to 9,795 in Singapore.
To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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