Japan’s Topix Rises on Speculation of JAL Bailout; Casio Drops

By Patrick Rial and Kotaro Tsunetomi

Oct. 19 (Bloomberg) -- Japan’s Topix index advanced, led by Japan Airlines Corp. on speculation the company will receive public funds. Banks rallied on confidence they won’t have to shoulder the bill for a turnaround plan.

Japan Airlines climbed 12 percent after the Yomiuri newspaper said Asia’s largest carrier may receive public funds. Mizuho Financial Group Inc., Japan’s second-biggest listed bank, added 2.3 percent. Casio Computer Co. and Yaskawa Electric Corp. slumped on loss reports. Fast Retailing Co., the operator of Japan’s Uniqlo casual-clothing chain, dropped 3.7 percent after a brokerage cut its investment rating on the shares.

The Topix gained 0.5 percent to 905.80 at the close of trading in Tokyo, reversing a decline of 0.8 percent. About twice as many stocks rose as fell. The Nikkei 225 Stock Average dropped 0.2 percent to 10,236.51.

“It’s becoming clear that the banks will not be victimized by the new government, wiping away some of the pessimism among investors,” said Fujio Ando, a fund manager at Tokyo-based Chibagin Asset Management Co.

Today marks the 22nd anniversary of “Black Monday,” when a drop in Hong Kong’s benchmark stock index and a 23 percent plunge in the Dow Jones Industrial Average in the U.S. sent markets reeling around the world. The Nikkei 225 and Topix slumped 15 percent the next day.

Mitsui Fudosan Co. led gains among property developers after Sumitomo Trust & Banking Co. and French insurer Axa SA said they plan to start a Japanese real-estate fund. Developers also rose after Nippon Accommodations Fund Inc. said it will sell shares to purchase additional properties.

Japan Airlines Rallies

Japan Airlines surged 12 percent to 113 yen, the sharpest gain in a year and the steepest advance in the Nikkei 225. The carrier may receive public funds to bolster capital, the Yomiuri newspaper reported.

The report came after the Nikkei newspaper said Japan’s three largest publicly traded banks, Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc., and Mizuho, decided to reject a government plan to help rehabilitate the airline. The three banks rose at least two percent today.

Casio sank 9 percent to 692 yen, its biggest decline since March 19 and the sharpest drop in the Nikkei 225. The company reversed its forecast for a 5 billion-yen ($55 million) annual profit to a 7 billion-yen loss as sales of mobile phones and digital cameras slump.

Yaskawa dropped 1.7 percent to 741 yen. The company reported a first-half operating loss of 8.4 billion yen and a net loss of 6.3 billion yen on Oct. 16, wider shortfalls than were expected by analysts.

Fast Retailing Rating

Fast Retailing, the operator of Japan’s Uniqlo casual- clothing chain, slumped 3.7 percent to 14,750 yen. The shares were lowered to “underweight” from “neutral” at JPMorgan Chase & Co., which said a recent rally took into account all positive news on the company. The stock climbed 44 percent in the month through Oct. 16.

“The markets are expecting the current growth trend to continue into next year,” said Yuichi Chiguchi, who helps manage about $8.6 billion at Diam Co. in Tokyo. “Investors may feel content until the end of this year, but may then realize the best period is already behind us.”

The Topix index has slumped 7.2 percent from its 2009 high reached on Aug. 26, as other Asian economies rebounded faster from the global recession. Stocks in the gauge are valued at 39 times estimated earnings, compared with an average of 28 times during the last four years.

Mitsui Fudosan climbed 4.6 percent to 1,643 yen. Nomura Real Estate Holdings Inc. added 4.3 percent to 1,582 yen.

Sumitomo Trust, Japan’s fifth-largest listed bank, and France’s Axa plan to raise 100 billion yen using debt and equity to invest in office property in “prime areas” of Tokyo amid signs the real-estate market is recovering. Sumitomo Trust shares climbed 1.2 percent to 498 yen.

Nippon Accomodations Fund jumped 7 percent 490,000 yen. The real-estate investment trust said Oct. 16 it will raise as much as 21.4 billion yen in a sale of new shares to buy more properties.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Kotaro Tsunetomi in Tokyo at ktsunetomi@bloomberg.net.