Japan's Topix Climbs for 5th Day, Best Streak Since February

June 6 (Bloomberg) -- Japan's Topix index advanced for a fifth day, the longest winning streak since February.

Trading companies led gains after Daiwa Institute of Research Ltd. reiterated its ``overweight'' stance on the industry and raised price estimates for five of the companies that it covers.

Marubeni Corp., which trades in goods ranging from fuel to textiles, soared the most since May 2004, after the company said it's close to winning a contract to build a power and water desalination plant in the United Arab Emirates.

Canon Inc. led declines by exporters after Federal Reserve Chairman Ben S. Bernanke said inflationary risks remain, dashing hopes for a cut in U.S. borrowing costs this year and as the yen strengthened against the dollar, reducing the value of overseas sales.

``Trading companies have been eyeing various profit-making opportunities where they can use earnings from their commodities business and Marubeni is a case in point,'' said Tomokatsu Mori, who helps oversee $7.4 billion at Fukoku Capital Management Inc. in Tokyo. ``Automaker and technology stocks took a hit from reduced expectations that U.S. rates will be cut soon.''

The Topix rose 1.94, or 0.1 percent, to 1778.50 at the close of trading in Tokyo, the longest string of gains since the six sessions ended on Feb. 26. The Nikkei 225 Stock Average lost 12.88, or 0.1 percent, to 18,040.93. About 2.6 billion shares changed hand on the first section of the Tokyo Stock Exchange, the most since March 9.

Overseas Projects

Companies reliant on domestic demand, such as NTT DoCoMo Inc., fell on concern the Bank of Japan may raise interest rates in the face of a weakening economy.

Marubeni, which trades goods ranging from fuel to textiles, soared 83 yen, or 9.3 percent, to 976, the largest gain since March 2, 2004. Sumitomo Corp., the third biggest trading house, jumped 85 yen, or 3.7 percent, to 2,365. Mitsubishi Corp., the nation's largest which generates the second-biggest proportion of its sales from selling crude and industrial fuel, added 110 yen, or 3.5 percent, to 3,220, the highest since at least since Sept. 10, 1974, according to data compiled by Bloomberg.

Daiwa Institute raised its rating on Marubeni to ``buy'' from ``outperform.'' That's the highest level in the brokerage's five-tier system. Daiwa also increased its 12-month price estimates for Sumitomo, Mitsubishi and two other trading houses.

``High commodity prices will continue to benefit trading companies this year,'' said Tsuyoshi Ishisone, an analyst at Daiwa Institute in Tokyo. ``We're also going to see income growth in their infrastructure work with foreign independent power producers, car businesses and financial services.''

Biggest Gains

Marubeni also advanced after the company said it may win a $3 billion contract to build a power plant and desalination facility in the UAE in conjunction with U.K.'s International Power Plc. The project was earlier reported by the Nikkei newspaper.

``Trading companies are taking on a lot of energy-related projects overseas, like the one with Marubeni in the UAE, and that's also definitely a factor in their gains,'' said Junichi Misawa, who oversees $655 million at STB Asset Management Co. in Tokyo.

A gauge of trading houses included in the Topix advanced 2.9 percent, the largest percentage gain among the 33 industry groups included in the broad benchmark.

Canon, the world's largest seller of digital cameras, lost 40 yen, or 0.6 percent, to 7,150. Advantest Corp., the world's biggest maker of memory-chip testing equipment, dropped 60 yen, or 1.1 percent, to 5,340.

``Although core inflation seems likely to moderate gradually over time, the risks to this forecast remain to the upside,'' Fed Chairman Bernanke said yesterday.

Stronger Yen

Traders, who a month ago were convinced the Fed would lower its target for the overnight lending rate at least once by year- end, now see almost no chance of that happening, interest rate futures yields show.

Japan's currency recently changed hands at 121.35 yen against the dollar, from 121.85 at the close of market trading yesterday in Tokyo. A stronger yen decreases the value of Japanese exporters' dollar-denominated sales when converted back into local currency, while their products become less competitive abroad.

Lenders advanced on speculation the Bank of Japan may raise borrowing costs soon, allowing banks to increase the spread on interest rates for deposits and loans.

Japanese five-year note yields yesterday climbed to the highest since July on speculation signs of faster global growth will prompt the central bank to increase borrowing costs.

Mitsubishi UFJ Financial Group Inc., the nation's largest bank by assets, climbed 20,000 yen, or 1.4 percent, to 1.41 million. Mizuho Financial Group Inc., the second biggest, added 6,000 yen, or 0.7 percent, to 869,000.

Rate Increase?

Investors see a 0.53 percentage point increase in Japan's benchmark overnight rate during the next 12 months, according to interest rate swap data provided by Credit Suisse Group. That's up from 0.36 point a month earlier.

NTT DoCoMo, the nation's largest mobile-phone operator, fell 2,000 yen, or 1 percent, to 200,000. Japan Tobacco Inc., the world's third-biggest maker of cigarettes, slid 12,000 yen, or 1.9 percent, to 614,000.

Japan's broadest indicator of the outlook for the economy was 20 percent in April, the Cabinet Office said, signaling for a sixth month that the longest expansion in more than 60 years may slow. That matched matching the median estimate of 33 economists surveyed by Bloomberg News.

Goodwill Soars

NEC Electronics Corp., Japan's third-biggest maker of semiconductors, soared 270 yen, or 9.2 percent, to 3,200. Damian Thong, an analyst at Macquarie Securities Ltd., raised the recommendation on the shares to ``outperform'' from ``underperform'' in a note released today. The company has room to cut costs and improve profitability, the analyst wrote.

Goodwill Group Inc. slumped by its exchange-imposed daily limit of 10,000 yen, or 12 percent, to 71,800 after the company's unit Comsn Inc. was barred from expanding its nursing home business. Japan's health ministry said during the lunch break that it will ban Comsn from expanding its business because it falsified applications. The ban will be in effect until December 2011.

Nikkei futures expiring in June slipped 0.1 percent to 18,040 in Osaka and fell 0.3 percent to 18,030 in Singapore.