Japan’s Nikkei Completes Longest Winning Streak in Two Decades

By Masaki Kondo

July 27 (Bloomberg) -- Japanese stocks rose, sending the Nikkei 225 Stock Average to its longest streak of gains in more than two decades.

Nomura Holdings Inc. and Daiwa Securities Group Inc., Japan’s biggest brokerages, led financial shares higher after the Nikkei newspaper said they may return to profit. Electronics maker Nidec Corp. jumped 3.5 percent after raising its first- half earnings target. Hitachi Ltd. rose 3.4 percent after the Nikkei said the manufacturer will buy out five affiliates. Nippon Yusen K.K. and Kawasaki Kisen Kaisha Ltd. declined after the shipping companies forecast annual losses instead of profits.

The Nikkei 225 climbed 144.11, or 1.5 percent, to 10,088.66 in Tokyo, this year’s second-highest close. It was the benchmark’s ninth day of gains, its longest winning streak since February 1988, when the gauge advanced for 13 days, according to Nikkei Inc., which compiles the index. The broader Topix index rose 7.78, or 0.9 percent, to 928.26.

“Investor sentiment has improved and risk appetite is growing, leading to the Nikkei’s long rally,” said Mitsushige Akino, who oversees the equivalent of $522 million at Ichiyoshi Investment Management Co. in Tokyo. “Regardless of the business climate, there are companies that manage to boost profit and investors will continue to pick up those shares.”

Returns on Japanese equities have made them more attractive than government debt for some investors. Estimated dividend yields on Topix-listed companies fell to 1.78 percent on July 24 from this year’s high of 2.91 percent on Jan. 26, according to data compiled by Bloomberg. That’s still higher than the yield of 1.38 percent on 10-year government bonds.

‘Few Choices’

“Investors have few choices but to look to equities, given their ample cash and the low yields on government bonds,” said Hisakazu Amano, who helps oversee some $16 billion at T&D Asset Management Co.

Nomura jumped 3.1 percent to 820 yen, and Daiwa rose 4.5 percent to 559 yen, leading brokerages to the sharpest gain among 33 industry groups in the Topix. The securities firms may post profits for the three months to June 30, helped by increased sales of mutual funds and underwriting of stock and bond issues, the Nikkei said. That would be Nomura’s first quarterly net income since 2007, according to Bloomberg data.

Nidec, the world’s biggest maker of disk-drive motors, climbed 3.5 percent to 6,790 yen in Osaka trading. The company boosted its six-month net income forecast by a third to 12 billion yen ($127 million). Goldman Sachs Group Inc. lifted its 12-month price estimate on the stock by 9 percent to 7,300 yen and reiterated its “buy” rating.

Affiliate Listing

Hitachi, whose products range from washing machines to nuclear reactors, advanced 3.4 percent to 304 yen, the sharpest gain since May 8. The company will make five affiliates into wholly owned subsidiaries, the Nikkei newspaper said today. The companies are battery maker Hitachi Maxell Ltd., Hitachi Plant Technologies Ltd., Hitachi Information Systems Ltd., Hitachi Software Engineering Co. and Hitachi Systems & Services Ltd., according to the newspaper. Shares of the affiliates soared as much as 18 percent.

Clarion Co., a maker of car stereos that’s about two-thirds owned by Hitachi, climbed 14 percent to 100 yen, the steepest advance among companies in the Nikkei.

Nippon Yusen, Japan’s largest shipping line, tumbled 4.6 percent to 399 yen, the sharpest decline in the Nikkei. Kawasaki Kisen Kaisha Ltd., No. 3, dropped 4 percent to 362 yen after the companies changed their annual forecasts to net losses from earlier projections of profit.

Shipping Stocks

Mitsui O.S.K. Lines Ltd. sank 3.5 percent to 599 yen after cutting its profit forecast, and all three companies cited lower demand for car transport. Shipping companies as a group were the biggest drag on the Topix today.

Nippon Residential Investment Corp. tumbled 8.4 percent to 233,500 yen and Advance Residence Investment Corp., which is affiliated with Itochu Corp., jumped 12 percent to 369,000 yen. Itochu, Japan’s No. 4 trading company by market value, plans to buy Nippon Residential and combine it with Advance Residence, the Nikkei said on July 25. This will mark Japan’s first merger between REITs, the newspaper said.

Nikkei futures expiring in September added 1.8 percent to 10,120 in Osaka and gained 1.6 percent to 10,125 in Singapore.

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