Japan Stocks Rise on Earnings Outlook; Komatsu, Kobe Steel Gain

By Masaki Kondo

July 14 (Bloomberg) -- Japanese stocks rose for the first time in 10 sessions amid expectations company earnings will recover and after financial shares rebounded in the U.S.

Mizuho Financial Group Inc., Japan’s second-biggest publicly traded bank, jumped 4.7 percent. Komatsu Ltd., the world’s No. 2 maker of earthmoving equipment, climbed 6.3 percent on a newspaper report the company likely had an operating profit in the April-June quarter. Kobe Steel Ltd. advanced 4.6 percent after South Korea-based rival Posco raised its 2009 production target.

The Nikkei 225 Stock Average climbed 201.05, or 2.2 percent, to 9,251.38 at the 11 a.m. break in Tokyo. The broader Topix index advanced 16.12, or 1.9 percent, to 868.54, with five stocks rising for every two that retreated.

“Japanese financial companies have completed the disposal of bad loans and bolstered their capital, which works as a safety net,” said Yoshihiro Ito, senior strategist at Okasan Asset Management Co., which oversees the equivalent of $7.7 billion in Tokyo. “Stimulus measures will soon start to take effect in emerging countries such as China and India.”

The Nikkei and Topix had fallen for nine straight days through yesterday as weaker-than-expected machinery orders, a stronger yen and Prime Minister Taro Aso’s plan to dissolve parliament weakened investor sentiment. Nikkei-listed companies traded at 38 times their estimated net income for this year, the lowest level since Feb. 6, according to Nikkei Inc.

U.S. Banks

In New York, the Standard & Poor’s 500 Index rebounded 2.5 percent after posting a fourth weekly decline on July 10. Meredith Whitney, the analyst who correctly predicted Citigroup Inc.’s dividend reduction and founded her own research company, said the American bank shares she covers will likely rise 15 percent and gave a “buy” rating on Goldman Sachs Group Inc.

Mizuho climbed 4.7 percent to 202 yen, while its brokerage arm Mizuho Securities Co. jumped 7.4 percent to 260 yen. Market leader Mitsubishi UFJ Financial Group Inc. added 3.4 percent, and No. 3 Sumitomo Mitsui Financial Group Inc. rose 6 percent.

“Regardless of which analyst calculates earnings estimates, Japanese banks will most likely record a V-shaped recovery this year,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co. “With an oligopoly in the market, the foundations of the country’s largest banks are unshakeable.”

Komatsu rose 6.3 percent to 1,377 yen. The company will likely report about 5 billion yen ($54 million) in operating profit for the three months to June, recovering from a loss in the previous quarter, the Nikkei newspaper reported. Demand in emerging markets, including China, and cost cuts contributed to earnings, the newspaper said.

China’s Demand

Isuzu Motors Ltd., a truckmaker that gets a quarter of its revenue from Asia, surged 9.6 percent. Asahi Glass Co., which makes a third of its sales in Asia, climbed 6.4 percent.

Kobe Steel jumped 4.6 percent to 160 yen, and Nippon Steel Corp., the world’s No. 2 maker of the alloy, leapt 3.2 percent to 324 yen. Posco, South Korea’s top steelmaker, yesterday lifted its 2009 steel production estimate by 6.4 percent from its previous target.

Separately, Shanghai-based Mysteel Research Institute said Baoshan Iron & Steel Co., China’s largest steelmaker, raised prices by as much as 14 percent for August delivery as demand from automakers and builders improved. Baoshan’s price change confirmed the continuing favorable market conditions, Yuji Matsumoto, an analyst for Tokyo-based Nomura Holdings Inc., wrote in a report today.

Weakening Yen

Sony Corp., maker of the PlayStation 3 game machine, rose 5.8 percent to 2,290 yen, and Canon Inc., a camera maker that gets a third of its sales from the Americas, added 3.4 percent to 3,020 yen. Toyota Motor Corp. advanced 3 percent to 3,480 yen. Makers of electronics and cars contributed the most to the Topix’s gain, followed by banks.

The yen depreciated against the dollar to as much as 93.16 from 92.24 at the close of Tokyo stock trading yesterday. Japanese large manufacturers expect the local currency to trade at an average of 94.85 this year, according to the Bank of Japan’s quarterly Tankan survey released earlier this month.

Nikkei futures expiring in September added 2.3 percent to 9,250 in Osaka and added 2.4 percent to 9,260 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.