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Stocks

China-linked Japanese shares rise on improving economic outlook

TOKYO -- Shares of trading houses and other Japanese companies reliant on the Chinese market are trending higher as worries about the country's economy subside.

     On Monday, Mitsui & Co. reached its highest level since April 2010, and Mitsubishi Corp. hit a more than three-year zenith. Both had risen for nine consecutive sessions.

     Since the start of the year, Mitsui shares have surged 12%, the most among the Topix Core 30. "China is a major consumer of coal, iron ore and other resources, so the country's economic trends impact trading companies generating income from resources," says Tatsunori Kawai, chief strategist at kabu.com Securities.

     Cosmetics maker Shiseido, which commands a large market share in China, climbed to an almost four-year high on Monday. And Hitachi Construction Machinery and Komatsu, which generate a large chunk of their sales in China, attracted buyers as well.

     Improved outlooks for the Chinese economy are bolstering these stocks. HSBC's Chinese purchasing managers' index for June, released Monday, topped the boom-or-bust mark of 50 for the first time in six months. And industrial production and retail sales in May increased 8.8% and 12.5% on the year, respectively.

     The government's economic stimulus measures, such as tax cuts for small and midsize companies, are yielding the intended effects, says Kiyoshi Ishigane, chief strategist at Mitsubishi UFJ Asset Management.

     Even for the steel and nonferrous metal industry, where oversupply was a concern, the outlook is brighter now. Kazuhiro Harada, senior analyst at SMBC Nikko Securities, expects solid demand as the Chinese government pads budgets for railway and bridge construction as part of a stimulus package.

     JFE Holdings' stock has risen 9.6% so far this month, compared with a 5% uptick for the Nikkei Stock Average. Mitsubishi Materials has climbed 14.1% over the same period, amid recovering demand for copper, which is used in everything from electric machinery to construction.

     Japanese stocks linked to China were top-heavy earlier this year due to worries over shadow banking and other issues in China's financial sector, but such concerns are now easing. Some remain cautious in light of the slumping housing market.

(Nikkei)

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