Japanese Stocks Rise on Insurers’ Profit; Quake Lifts Builders

By Masaki Kondo

Aug. 11 (Bloomberg) -- Japanese stocks rose after Aioi Insurance Co. and Mitsui Sumitomo Insurance Group Holdings Inc. posted profit growth, and an earthquake spurred speculation builders will benefit from reconstruction.

Aioi advanced 4.2 percent, while Mitsui Sumitomo rose 2 percent. Nippon Sheet Glass Co. and Asahi Glass Co. surged at least 6.2 percent after Merrill Lynch & Co. newly rated the stocks “buy.” Nissei Build Kogyo Co., which makes and leases prefabricated houses, soared 9.1 percent. Honda Motor Co. lost 2.8 percent after recent advances pushed up the share price to 106 times estimated profit and the yen strengthened.

The Nikkei 225 Stock Average gained 61.20, or 0.6 percent, to 10,585.46 in Tokyo. The broader Topix index added 4.27, or 0.4 percent, to 973.51, with two stocks rising for each that fell. The Nikkei climbed to the highest close since Oct. 3 and the Topix reached a level not seen since Oct. 7.

“Investor sentiment remains resilient with the global economy and company earnings on the mend,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of $89 billion. “There is concern current stock prices don’t match the fundamentals of the economy and earnings.”

The Nikkei gained 19 percent in 2009, driving up the gauge’s price to 48 times estimated earnings. This compares with 17 times for the Standard & Poor’s 500 Index in the U.S. and 14 times for Europe’s Dow Jones Stoxx 600 Index, according to Bloomberg data.

Insurers’ Rally

Aioi, a third owned by Toyota Motor Corp., added 4.2 percent to 477 yen. Mitsui Sumitomo rose 2 percent to 2,615 yen. Aioi’s net income more than quadrupled in the three months to June 30, because earnings a year earlier were reduced by losses on derivatives. Mitsui Sumitomo said first-quarter profit increased 37 percent.

Fuji Fire & Marine Insurance Co., which is scheduled to report earnings on Aug. 14, soared 15 percent. The company said yesterday a paper gain on its security holdings amounted to 15.6 billion yen ($161 million) as of June 30, compared with a loss of 17.4 billion yen three months earlier.

Nippon Sheet Glass, which earns almost half its revenue in Europe, surged 9.2 percent to 355 yen, sending a gauge of glassmakers to the biggest gain among the Topix’s 33 industry groups. Asahi Glass, Asia’s largest maker of the material, jumped 6.2 percent to 853 yen. Bank of America Corp.’s Merrill Lynch rated both stocks “buy” in initial coverage, saying product price increases in Europe will contribute to earnings.

Earthquake

Nissei Build Kogyo jumped 9.1 percent to 72 yen, while bridge builder P.S. Mitsubishi Construction Co. climbed 5.6 percent to 413 yen. The magnitude 6.5 earthquake hit offshore of Honshu, Japan’s main island, at 5:07 a.m. local time, the Japan Meteorological Agency said.

“With the market overall rising only a little, speculators are buying earthquake-related shares for quick returns,” said Masayoshi Yano, a senior market analyst at Tokyo-based Meiwa Securities Co. “The tremor doesn’t have an impact on those companies’ fundamentals.”

Honda Motor, Japan’s No. 2 automaker, fell 2.8 percent to 3,120 yen. Parts-maker Denso Corp., which has almost doubled this year, declined 1.6 percent. Automakers, collectively the biggest winners among the Topix’s 33 groups this year, were the biggest drag on the gauge today.

Carmakers accelerated declines in the afternoon after the yen strengthened during the lunch break. The Japanese currency appreciated versus the dollar to as much as 96.56 from 97.23 at the 3 p.m. close of Tokyo stock trading yesterday. A stronger yen reduces the value of overseas sales at Japanese companies when converted into local currency.

Nikkei futures expiring in September rose 0.3 percent to 10,580 in Osaka and gained 0.4 percent to 10,585 in Singapore.

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