Japanese Stocks Rise on U.S. Manufacturing; Shipping Lines Drop

By Jason Clenfield

June 2 (Bloomberg) -- Japanese shares rose after U.S. manufacturing figures added to signs the global recession is abating. Stocks pared gains on media reports North Korea is preparing to launch a medium-range missile.

Sony Corp., maker of the PlayStation 3 game machine, climbed 4.3 percent. Honda Motor Corp., the nation’s No. 2 carmaker, jumped 2.2 percent on optimism General Motors Corp.’s bankruptcy will allow Japanese carmakers to expand market share. Nippon Yusen KK, Japan’s No. 1 shipping line, lost 1.7 percent as investors speculated the shares have risen too fast.

The Nikkei 225 Stock Average climbed for a fifth day, adding 26.56, or 0.3 percent, to close at 9,704.31 in Tokyo, the highest since Oct. 7. The broader Topix index inched up 1.04, or 0.1 percent, to 913.56, with almost three shares advancing for every two that retreated.

“Markets around the world have been rising steadily from the middle of last week, and investors have just about exhausted their appetite for buying,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion in Tokyo. “There’s concern shares are overbought.”

In the U.S., The Institute for Supply Management’s factory index rose in May to 42.8 from 40.1 the previous month. The result was less than the 50 level that signals growth, while economists estimated the gauge would gain to 42.3. A measure of new orders, a leading indicator of Japanese exports, signaled an expansion for the first time since September 2007.

Sony, Canon

Sony climbed 4.3 percent to 2,690 yen. Sharp Corp., Japan’s biggest maker of liquid-crystal display televisions, rose 1.2 percent to 1,100 yen. Canon Inc., which makes three quarters of its sales overseas, added 1 percent to 3,180 yen. Makers of electronics and cars were the biggest gainers among the Topix’s 33 industry groups.

GM, the world’s largest carmaker until its 77-year reign ended last year, filed for bankruptcy protection in the U.S. yesterday with a plan to create a viable company that can compete in world markets. The Detroit-based automaker plans to sell unprofitable brands and close at least 11 factories before emerging as a new, smaller company in 60 to 90 days.

Honda rose 2.2 percent to 2,820 yen. Toyota gained 0.8 percent to 3850 yen. Mazda Motor Corp., which exports about 80 percent of its production, increased 3.2 percent to 256 yen.

‘Huge Opportunity’

“For Japanese automakers, GM’s collapse presents a huge opportunity to take market share,” said Fumiyuki Nakanishi , a strategist at SMBC Friend Securities Co. in Tokyo. “All the bad news on GM is out, and that’s a relief to the market.”

Stocks lost momentum after Yonhap News said North Korea is preparing to test another missile following six launches last week and the nation’s second detonation of a nuclear device. Leader Kim Jong Il picked his third son to succeed him, the Dong-A Ilbo newspaper said.

“Until now, the market hasn’t reacted much to North Korea’s missile tests, but, together with the leadership change, this launch carries a different weight,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $53 billion. “If the leadership handoff gets complicated there’s a risk the state itself could fall into chaos.”

Nippon Yusen lost 1.7 percent to 471 yen. Rival Mitsui O.S.K Lines Ltd., operator of Japan’s largest fleet of iron-ore ships, dropped 2.9 percent to 698 yen. Both companies broke a four-day winning streak and were cut to “underperform” from “neutral” by Merrill Lynch & Co., the brokerage bought last year by Bank of America Corp.

Relative Strength

The relative-strength index for a gauge of Japanese shipping stocks yesterday exceeded the 70 threshold some traders use as a sign to sell. The shipping index, which has surged 18 percent in May, was the second-biggest loser among Topix groups today.

“Shipping shares have really exploded recently, so there’s a feeling they’ve overheated,” said Mitsubishi UFJ’s Ishigane.

Nomura Real Estate Holdings Inc. sank 4.8 percent to 1,585 yen after the developer said it plans to raise as much as 64.1 billion yen ($665 million) from the sale of new shares. Sony Financial Holdings Inc. plummeted by a record 14 percent to 241,400 yen after the Sony Corp. subsidiary said the value of its life insurance business fell by more than half last fiscal year.

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