Japan’s Topix Falls, Led by Banks, JAL; Inpex Advances on Oil

By Patrick Rial and Satoshi Kawano

Oct. 16 (Bloomberg) -- Japan’s Topix index fell, led by banks, following earnings from U.S. rivals and as Japan Airlines Corp. dropped on concern its turnaround plan may falter. Oil producers gained after crude rallied to a one-year high.

Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, slumped 3.1 percent and Sumitomo Mitsui Financial Group Inc. dropped 1.9 percent after earnings reports from Goldman Sachs Group Inc. and Citigroup Inc. disappointed some investors. Japan Airlines plunged 11 percent after Kyodo News said Asia’s biggest carrier may drop a plan to sell assets. Inpex Corp., Japan’s biggest oil explorer, climbed 1.4 percent.

“Capital continues to exit the market as uncertainties pile up,” said Masatsugu Okeya, a fund manager at Chiba-Gin Asset Management Co. in Tokyo. “Rising credit costs are causing damage to banks’ earnings and balance sheets, fanning concerns they will need to raise additional capital.”

The Nikkei 225 Stock Average added 0.2 percent to 10,257.56 at the close of trading in Tokyo, after swinging between gains and losses in the afternoon. The broader Topix fell 0.4 percent to 900.95, with about three stocks retreating for every two that climbed. For the week, the Nikkei rose 2.4 percent and the Topix climbed 0.3 percent.

In New York, oil companies helped lift the Standard & Poor’s 500 Index by 0.4 percent yesterday to a level last seen in October 2008. Gains were limited as investors sold financial shares after the profit reports at Citigroup and Goldman Sachs.

Banks Retreat

Mitsubishi UFJ dropped 3.1 percent to 470 yen. Sumitomo Mitsui Financial, Japan’s second-largest bank by market value, fell 1.9 percent to 3,190 yen. Tokio Marine Holdings Inc., the country’s largest property insurer, slumped 4.3 percent to 2,330 yen. Measures of financial companies included in the Topix logged four of the five largest declines among the benchmark’s 33 industry groups.

Goldman Sachs reported earnings yesterday that fell short of a record posted the previous quarter. Citigroup recorded a profit as it added the smallest amount to loan-loss reserves in two years.

Meanwhile, JPMorgan Chase & Co., Bank of America Corp. and Citigroup, the biggest U.S. credit-card lenders, said more customers fell behind on payments in September as Credit Suisse Group AG forecast industry losses will mount for at least another year.

“Although we are seeing some nominally good results from the U.S. financials, they also have very bad debts on their books,” said Yuuki Sakurai, chief executive officer of Fukoku Capital Management Inc., which manages about 800 billion yen ($8.6 billion). “In Japan, we are going to see some very big equity issuances from the mega-banks.”

Japan Airlines Plunges

Japan Airlines plunged 11 percent to 101 yen, the sharpest decline in the Nikkei 225. Kyodo News said the carrier may drop a plan to sell a stake in JALways Co. that the company had forecast would generate a 90 billion yen ($992 million) profit. Last month the government rejected the carrier’s turnaround plan, while the Nikkei reported the company is now seeking debt relief from creditors including banks.

“The future of JAL is uncertain and so investors are selling,” said Satoshi Yuzaki, a section manager at Takagi Securities in Tokyo. “It seems like it will be difficult to get the support of banks.”

Inpex gained 1.4 percent to 798,000 yen. Mitsui & Co., whose profit is the most sensitive among Japan’s five largest trading houses to changes in the price of oil, added 0.4 percent to 1,263 yen. Cosmo Oil Co., a refiner partly owned by the government of Abu Dhabi, advanced 3.5 percent to 268 yen.

Fast Retailing, Murata

Crude oil rallied 3.2 percent to $77.58 a barrel yesterday in New York, the highest since Oct. 14, 2008. A U.S. Energy Department report yesterday showed an unexpected decline in stockpiles of gasoline after refineries idled capacity.

Fast Retailing Co., the operator of Japan’s Uniqlo casual- clothing-store chain, gained 5.5 percent to 15,320 yen, the steepest gain in the Nikkei. Brokerages including CLSA Ltd. and Macquarie Group Ltd. boosted share-price targets on the discount retailer. CLSA’s Jeanie Chen cited an improved outlook for same- store-sales.

Murata Manufacturing Co., the world’s largest maker of ceramic capacitors used in mobile-phone handsets, climbed 4 percent to 4,380 yen in Osaka after Deutsche Bank AG boosted the stock to “buy” from “sell.”

Electronics and machinery makers also got a boost as the yen depreciated to as low as 90.99 versus the dollar, a level not seen since Sept. 25. Against the euro, Japan’s currency weakened to the lowest since Aug. 24. A falling yen helps boost the value of sales generated by Japanese companies overseas when translated into their home currency.

The Topix index has advanced 4.9 percent in 2009, lagging behind increases of 21 percent for the S&P 500 and 25 percent for the Dow Jones Stoxx 600 Index in Europe. Shares in the Japanese benchmark are valued at 38 times estimated earnings, compared with an average of 28 times during the last four years.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Satoshi Kawano in Tokyo at Skawano1@bloomberg.net.