Japan Stocks Rise Most in 2 Weeks on Recovery Hope; Hoya Gains

By Masaki Kondo

Sept. 10 (Bloomberg) -- Japanese stocks rose the most in two weeks and every industry group advanced, tracking gains in the U.S. on speculation earnings and the economy will recover.

Hoya Corp., Japan’s largest maker of eyeglass lenses, gained 4.3 percent after the Nikkei newspaper reported its Pentax camera division will likely avoid a loss. Omron Corp., the maker of the world’s first automated traffic signals, climbed 4.6 percent after KBC Securities said the company will exceed its earnings forecast. Mitsubishi UFJ Financial Group Inc. added 4.4 percent, rebounding from an 11 percent loss in the past six sessions and leading banks higher.

“Investors want to buy banks and manufacturers on dips because the outlook for a continuing economic recovery remains intact, and they expect earnings at these companies to improve,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees the equivalent of $3.9 billion in Tokyo.

The Nikkei 225 Stock Average rose 2 percent to close at 10,513.67 in Tokyo. The broader Topix index added 2 percent to 958.49, with six times as many shares gaining as declining. Both gauges advanced the most since Aug. 24, and the number of shares traded on the Tokyo Stock Exchange was the highest this month.

Manufacturing stocks climbed even after a Cabinet Office report showed Japanese machinery orders dropped more than economists had estimated in July. Orders are regarded as an indicator of capital spending in the next three to six months.

Risk Appetite

Investors are betting a recovery in profits will accelerate in 2010, helping to justify valuations for this year that are the highest among the world’s biggest equity markets. Nikkei listed shares trade at 23 times next year’s estimated earnings, almost half the level for 2009, according to Bloomberg data.

In New York, the Standard & Poor’s 500 Index climbed 0.8 percent yesterday to the highest level since Oct. 6. Hiroyuki Nakai, chief strategist at Tokai Tokyo Financial Holdings Inc., said that showed investors are willing to take on more risk in search of higher returns.

Hoya climbed 4.3 percent to 2,200 yen, the steepest advance since July 31. The company’s Pentax division, which makes endoscopes and cameras, may break even or post an operating profit of “several hundred million” yen for the July-September period, the Nikkei said today.

Omron jumped 4.6 percent to 1,669 yen in Osaka trading, the highest close in almost a year. KBC Securities rated the stock “positive” in new coverage, saying the first-half operating loss will be narrower than Omron’s forecast, owing to cost cuts.

Banks Gain

Mitsubishi UFJ, Japan’s largest listed bank, climbed 4.4 percent to 550 yen. Mizuho Financial Group Inc., the Japanese stock with the highest number of shares being sold short, gained 2 percent to 204 yen and was the country’s most-actively traded stock by value today.

Short sellers borrow shares and sell them at current prices in a bet that prices will fall, then seek to buy them back more cheaply and keep the difference as profit. They lose money if prices rise.

Banks, which were the biggest losers in Tokyo in the previous two days, had today’s steepest advance among the Topix’s 33 industry groups, all of which rose.

“Even a sharp earnings recovery in 2010 has been fully priced into the market, so institutional investors are reluctant to buy and only speculators are active,” said Mitsushige Akino, who oversees the equivalent of $652 million at Ichiyoshi Investment Management Co. in Tokyo.

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