Japan's Topix Climbs; Marubeni Leads Gains by Trading Houses

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 Feb. 26., after the Nikkei newspaper said it's investing in a power venture 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 1.69, or 0.1 percent, to 1778.25 at the 11 a.m. break in Tokyo, its longest string of gains since the six sessions ended on Feb. 26. The Nikkei 225 Stock Average slipped 16.50, or 0.1 percent, to 18,037.31.

Marubeni surged 58 yen, or 6.5 percent, to 951. Sumitomo Corp., the third biggest, jumped 70 yen, or 3.1 percent, to 2,350. Mitsubishi Corp., the nation's largest, added 60 yen, or 1.9 percent, to 3,170.

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.

Overseas Projects

Marubeni also advanced after the Nikkei said the company plans to purchase 20 percent of a power plant and desalination facility in the UAE for 360 billion yen ($2.96 billion).

``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 1.9 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 60 yen, or 0.8 percent, to 7,130. Honda Motor Co., which had 55 percent of its sales in North America in the year ended March 31, declined 20 yen, or 0.5 percent, to 4,280. Sony Corp., the world's No. 2 maker of consumer electronics, fell 40 yen, or 0.6 percent, to 6,800.

Stronger Yen

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

Traders, who a month ago were convinced the Fed would lower its target for the overnight lending rate between banks 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 121.29 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.

Rate Increase?

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 10,000 yen, or 0.7 percent, to 1.4 million. Mizuho Financial Group Inc., the second biggest, added 11,000 yen, or 1.3 percent, to 874,000.

Investors see a 0.53 percent 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 percent point a month earlier.

A 0.25 percent point interest rate increase by the Bank of Japan will result in an estimated 0.2 percent rise in the rate lenders charge for loans, while interest paid on deposits will gain only 0.1 percent, according to Brett Hemsley, a Tokyo-based banking analyst at HSBC Securities (Japan) Ltd.

NEC Electronics Corp., Japan's third-biggest maker of semiconductors, soared 260 yen, or 8.9 percent, to 3,190. 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.

Nikkei futures expiring in June dropped 0.1 percent to 18,030 in Osaka and fell 0.2 percent to 18,045 in Singapore.