Japan’s Topix Index Rises Most in a Month on Analyst Upgrades

By Masaki Kondo

Aug. 20 (Bloomberg) -- Japan’s Topix index rose the most in a month after analysts boosted their investment ratings on airlines and automakers on the outlook for improved earnings.

All Nippon Airways Co. gained 4.4 percent after Mitsubishi UFJ Financial Group Inc. said the stock is “about to take off.” Isuzu Motors Ltd. and Hino Motors Ltd. jumped more than 5 percent after Nikko Citigroup Ltd. said there are “clear signs” earnings will improve. Panasonic Corp., an electronics maker aiming to boost profit in emerging markets, rose 2.5 percent as a gain in Chinese equities bolstered sentiment.

“The consensus remains among investors that the global economy is on course for a recovery,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees $53 billion. “We have to see further improvement in the economy and company earnings for markets to go up higher.”

The Topix advanced 1.6 percent to close at 958.59 in Tokyo, its steepest climb since July 21, and all 33 industry groups rose. The Nikkei 225 Stock Average added 1.8 percent to 10,383.41. Yesterday, both gauges sank to their lowest levels this month.

The Nikkei’s 47 percent rally since a more than quarter- century low on March 10 has lifted the average price of shares in the gauge to 47 times estimated earnings, compared 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 data compiled by Bloomberg.

The Nikkei accelerated gains this afternoon as the Shanghai Composite Index rose more than 3 percent. Yesterday, Japan’s market deepened its slump in the final 30 minutes of trading as Chinese equities fell.

‘Clear Signs’

All Nippon, Japan’s No. 2 carrier, rose 4.4 percent to 285 yen, the highest close since July 9. Mitsubishi UFJ lifted its rating to “outperform” from “market perform,” saying the stock was “cheap” relative to its earnings prospects for 2010 and onwards.

Isuzu, Japan’s No. 1 maker of light-duty trucks, jumped 5.4 percent to 197 yen. Rival Hino Motors climbed 5.1 percent to 391 yen. “We are starting to see clear signs that truckmaker earnings could turn around in the second half,” said Nikko Citigroup, which raised the stocks to “hold” from “sell.”

Panasonic advanced 2.5 percent to 1,466 yen. Canon Inc., the world’s biggest maker of digital cameras, added 4.1 percent to 3,540 yen, the highest close since Nov. 5. Electronics makers contributed the most to the Topix’s gain.

‘Double-Digit Growth’

Last year, the Chinese government said residents in the smaller towns and villages will get discounts of as much as 13 percent on purchases of electronics and appliances to stimulate the economy. Panasonic said in January that it aims to keep “double-digit growth this year by all means” in such countries as China and Vietnam.

“With its vast land and population, people tend to think China has a very large influence over the global economy,” said Mitsubishi UFJ’s Ishigane. “If you ponder for a moment whether a country with a much smaller economy and consumer spending than the U.S. can lead the global economy, you will see that it can’t.”

Nikkei futures expiring in September added 1.5 percent to 10,360 in Osaka and rose 1.7 percent to 10,360 in Singapore.

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