Nikkei gains 0.89 pct on China output, capital rules for banks

08:04, September 14, 2010      

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Tokyo stocks advanced on Monday, with the key Nikkei stock index gaining 0.89 percent for a third- day of positive closes as robust Chinese production data, better- than-expected U.S. wholesale inventories and new capital rules for central banks boosted optimism global growth is not slowing.

Brokers said that Asian stocks were lifted by China's industrial production data for August showing the pace of growth in China is still vigorous with factory output gaining 13.9 percent in August from a year earlier, far exceeding economists' expectations.

Consumer prices were up 3.5 percent, the most in 22 months, as food costs climbed and retail sales increased 18.4 percent, official statistics revealed.

"Domestic demand is robust and the Chinese economy is heading for a smoother and softer landing than people had feared," commented one local analyst.

Japan's exporters were grated some relief by a softer yen versus the euro and the U.S. dollar, with Japan's currency falling to as low as 107.77 against the euro Monday in Tokyo from 106.42 at the close of stock trading on Sept. 10, and was trading around the 84.00 level against the U.S. dollar.

Japanese firms reliant on overseas business cheer a weaker yen as profits are boosted when repatriated. Many Japanese companies have set their assumption rates for dollar/yen at 90 yen and at 110-115 yen for euro/yen in the year to March 2011.

The 225-issue Nikkei Stock Average gained 82.65 points from Friday to 9,321.82, booking its highest close in more than three weeks, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange was up 3.93 points, or 0.47 percent, to 837.65.

Recent discontent in the market over Japan's political instability in the run up to and most likely in the weeks and months following the ruling party's presidential election to be held tomorrow, ebbed away as there were no surprises to the market over a decision by global regulators and central bankers on new capital rules, known as Basel III.

Incumbent Prime Minister Naoto Kan is having his party leadership challenged by political powerbroker Ichiro Ozawa and the result of the election on Sept. 14 will dictate to an extent Japan's monetary policy and how the government intends to deal with its burgeoning debt, flagging economy and persistent deflation.

But The Basel Committee on Banking Supervision more than doubling capital requirements for banks, effectively giving lenders as long as eight years to comply, as part of efforts to prevent financial crises, settled jitters in the market and domestic political turbulence didn't prove a downward factor Monday.

Regulators will require lenders to have common equity equal to at least 7 percent of assets, weighted according to their risk, including a 2.5 percent buffer to withstand future stress.

"Investors welcomed that this event has run its course without a hitch after the Basel decision came within expectations, and that that sentiment is also spreading to the currency market, with the euro higher," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

Japan's megabucks rose on the news with Tokyo Mitsubishi UFJ Financial Group Inc. gaining 2 percent to 411 yen and Mizuho Financial Group Inc. rising 1.5 percent to 132 yen.

Sumitomo Mitsui Financial Group inc., for its part, climbed 1.9 percent to 2,586 yen.

"Market sentiment is good today, with bank shares higher following the Basel Committee's decision," said Masumi Yamamoto, market analyst at Daiwa Securities Capital Markets Co.

Exporters advanced as the yen retreated and Fanuc Ltd., an industrial robot maker, gained 1.6 percent to 9,850 yen and Kyocera Corp. rose 1.8 percent to 7,810 yen, while Tokyo Electron Ltd. added 2.4 percent to 4,250 yen.

Honda Motor Co., a carmaker that earns more than 80 percent of its revenue outside Japan, advanced 1.7 percent to 2,832 yen.

China-linked issues found favor on the first trading day of the week, with Komatsu climbing 1.3 percent to 1,851 yen and Hitachi Construction advancing 1.2 percent to close at 782 yen.

In thin trade some 1.44 billion shares changed hands on the Tokyo Exchange's First Section, down from Friday's volume of 2.19 billion shares, with advancing issues outnumbering declining ones by 795 to 679.

Source: Xinhua


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