Japanese Stocks Advance as Earnings Recover, Commodities Climb

By Patrick Rial and Masaki Kondo

Oct. 20 (Bloomberg) -- Japanese stocks climbed to the highest this month, led by commodities companies and electronics makers, as earnings reports boosted confidence the economic recovery is continuing.

Mitsubishi Corp., Japan’s largest trading company, gained 2.8 percent after oil climbed to a one-year high. Shin-Etsu Chemical Co., the world’s largest maker of silicon wafers, added 1.1 percent as U.S. technology companies had better-than- estimated earnings. Asahi Glass Co. rose 1.9 percent after a competitor’s production was disrupted. Komatsu Ltd., the world’s second-largest maker of earth movers, climbed 1.4 percent after the Nikkei newspaper said quarterly profit exceeded forecasts.

The Nikkei 225 Stock Average added 1 percent to 10,336.84 at the close of trading in Tokyo. The broader Topix index gained 0.8 percent to 913.45, with more than twice as many shares advancing as retreating. Both gauges settled at the highest close since Sept. 25.

“The global economy is continuing to recover,” said Masaru Hamasaki, a strategist at Tokyo-based Toyota Asset Management Co., which oversees about $14 billion. “Demand is improving, especially in high-tech industries, and we can expect a series of better-than-expected results.”

The Topix has climbed 6.3 percent this year, set for its biggest annual increase since 2005. Shares in the benchmark are valued at 39 times estimated earnings, compared with 18 times for the Standard & Poor’s 500 Index in the U.S.

Commodities Advance

Mitsubishi, which generates more than half its profit from raw materials, climbed 2.8 percent to 2,040 yen, the highest since Oct. 2 last year. Mitsui & Co., Japan’s second-largest trading house, advanced 1.2 percent to 1,278 yen. Inpex Corp., the country’s biggest oil explorer, rose 3.4 percent to 827,000 yen. The group that includes Inpex had the second-steepest increase among 33 industries in the Topix.

Crude oil rose 1.4 percent to $79.61 a barrel in New York yesterday, the highest level since Oct. 13, 2008. The London Metals Index, a measure of six metals including copper and zinc, jumped 3.2 percent yesterday.

“It seems every day we are seeing new highs for the year being reached by a number of commodities, pushing investors to take a second look at raw materials companies, including trading houses,” said Tsutomu Yamada, a market analyst at kabu.com Securities Co. in Tokyo. “Every once in a while Japan gets to go along for the ride on the global market rally.”

Chips, Apple

After the close of U.S. trading, Texas Instruments Inc., the second-largest U.S. chipmaker, forecast fourth-quarter profit and sales that exceeded analysts’ estimates, and Apple Inc.’s July-September profit also beat estimates.

Shin-Etsu Chemical Co., the world’s largest maker of silicon wafers, gained 1.1 percent to 5,420 yen. Murata Manufacturing Co., which makes components for Apple products, climbed 1.8 percent to 4,480 yen in Osaka. Murata was also boosted to “neutral” from “sell” by Daiki Takayama at Goldman Sachs Group Inc. on the outlook for orders.

“Japan’s stock market is unable to move based on purely domestic factors,” said Kenichi Hirano, general manager at Tokyo-based Tachibana Securities Co. “Stocks are rising just because of gains in overseas markets.”

Asahi Glass, the world’s largest maker of glass substrates for plasma-display panels, gained 1.9 percent to 809 yen. Nippon Electric Glass Co. the world’s third-biggest supplier of glass for liquid-crystal displays, climbed 1 percent to 970 yen.

‘Glass Shortage’

Corning Inc., the world’s biggest maker of glass for flat- panel televisions, said yesterday that a factory in Taiwan that makes LCD glass had a power disruption last weekend that will probably reduce output this quarter.

“It will take at least two to three months to recover full use of the impacted furnaces,” James Kim, a Hong Kong-based analyst at Nomura Holdings Inc., said in a report. “Deeper glass shortage should lead to further panel shortage in the LCD industry, further buffering prices.”

Komatsu added 1.4 percent to 1,822 yen. Rival Hitachi Construction Machinery Co., the world’s largest maker of giant excavators, climbed 2 percent to 2,270 yen.

Komatsu, scheduled to report results next week, likely had a 10 billion yen ($110 million) operating profit in the latest quarter, buoyed by demand in China, the Nikkei reported. Caterpillar Inc., the company’s larger rival, is “among the best-positioned companies to benefit from improving global growth,” RBC Capital Markets wrote in a report yesterday.

“We’re likely to see companies beat forecasts as they report in coming weeks, the question remains though whether they will lift full-year projections,” said Naoki Fujiwara, chief fund manager at Tokyo-based Shinkin Asset Management Co., which oversees the equivalent of $4 billion. “I think the global economy is without a doubt improving, but I’m skeptical that shares can gain much more from here.”

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