Japanese stocks rose, led by banks and drug companies, on speculation two local lenders will merge and that the spread of swine flu will spur sales of antiviral treatments.
Shinsei Bank Ltd. and Aozora Bank Ltd. soared more than 12 percent after the Nikkei newspaper said the companies are in merger negotiations. Chugai Pharmaceutical Co., which sells the antiviral drug Tamiflu, rallied 14 percent after swine flu cases prompted the U.S. to declare a public health emergency. H.I.S. Co., Japan’s No. 2 travel company, plunged 9.2 percent on concern the disease will discourage overseas flights.
The Nikkei 225 Stock Average gained 68.64, or 0.8 percent, to 8,776.63 at the 11 a.m. break in Tokyo. The broader Topix index climbed 8.88, or 1.1 percent, to 838.93, with more than two shares advancing for each that declined.
“Financial institutions seem to have trouble making money so it’s a good idea for them to move forward with mergers and acquisitions,” said Soichiro Monji, chief strategist at Tokyo- based Daiwa SB Investments Ltd., which manages $53 billion. “Sentiment is currently quite bullish, so it could be a good reason to buy stocks related to the swine influenza problem. But the rally won’t be sustained for longer than a week.”
The Nikkei is headed for a 8.2 percent gain in April, the steepest monthly gain since in a year, as first-quarter profits at U.S. banks and expanded stimulus plans lifted optimism the global recession is easing. The gauge has slipped in the past two weeks as companies including JFE Holdings Inc. and Sumitomo Realty & Development Co. posted lower profits.
GDP Slump
Japan’s Cabinet Office said today the nation’s gross domestic product will shrink a record 3.3 percent this fiscal year as exports and corporate spending tumble at an unprecedented pace.
Shinsei Bank, the former Long Term Credit Bank of Japan which collapsed in 1998, soared 13 percent to 140 yen. Aozora, controlled by Cerberus Capital Management LP, rallied 16 percent to 137 yen, the steepest gain since November. The companies are in merger talks with the goal of integrating operations in the summer of 2010, the Nikkei newspaper reported over the weekend. The banks declined to deny the report.
Sumitomo Mitsui Financial Group Inc., Japan’s No. 2 bank by market value, climbed 2.6 percent to 3,170 yen. The lender was chosen as the preferred buyer of Citigroup’s Nikko Cordial Securities Inc. after making an offer of about 500 billion yen ($5.2 billion), people with knowledge of the matter said.
Financial shares also gained after the U.S. Federal Reserve announced the methods it used to conduct stress tests of the biggest U.S. banks, while stopping short of any details that signaled how much new capital regulators will demand.
Swine Flu
“Losses associated with the deepening recession and financial market turmoil have substantially reduced the capital of some banks,” the Fed report said. “Most U.S. banking organizations currently have capital levels well in excess of the amounts required to be well capitalized.”
Chugai jumped 14 percent, the most since January 2000, to 1,846 yen on speculation cases of swine flu will spur sales of Tamiflu, made by the company’s partner Roche Holding AG. Japan Vilene Co., a face-mask producer, was bid higher by 20 percent to 487 yen. Eiken Chemical Co., a maker of diagnostic kits, rose 12 percent to 722 yen.
Swine flu cases in the U.S. and Mexico led the Obama administration to declare a public health emergency and release stockpiles of medicine. Japan’s health ministry is checking supplies of influenza treatments and screening travelers from Mexico at airports for fever, Yoshio Namba, head of the office for pandemic influenza, said at a briefing in Tokyo yesterday. More than 80 people have died from the disease.
H.I.S. plunged 9.2 percent to 1,577 yen as Kyodo News said companies including Panasonic Corp. and Sharp Corp. are asking employees not to travel to Mexico. Japan Airlines Corp., Asia’s biggest carrier, lost 2.5 percent to 194 yen.
Chuo Corp., a Japanese yarn maker, plummeted 73 percent to 7 yen after filing for bankruptcy protection last week with about 34 billion yen in liabilities.
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