Tokyo Stocks Rally on Hopes for U.S. Bad Debt Cleanup

Tokyo, Sept. 19 (Jiji Press)–Stocks rallied on the Tokyo Stock Exchange Friday, buoyed by expectations that the U.S. government will take a sweeping measure to solve the financial industry turmoil stemming from the subprime mortgage mess.

The 225-issue Nikkei average soared 431.56 points, or 3.8 pct, to close at the day’s high of 11,920.86. On Thursday, the key market gauge lost 260.49 points to hit the lowest closing since June 27, 2005.

The TOPIX index of all first-section issues ended up 51.44 points, or 4.7 pct, at 1,149.12, after shedding 23.75 points the previous day.

Investors snapped up recently battered financial and export- related stocks after U.S. equities surged on Thursday on a report about the possible creation by the U.S. government of an agency similar to Resolution Trust Corp., which was set up to contain the savings and loan crisis in the late 1980s and early 1990s.

The agency, if it actually comes into being, is expected to take on mortgage-backed securities and other soured assets held by financial institutions, to help them clean up their balance sheets.

The market also welcomed a coordinated liquidity-supply action by six central banks announced Thursday, whereby the banks funnel massive dollars into the global money markets to ease strains caused by the collapse of U.S. investment bank Lehman Brothers Holdings Inc. earlier this week.

“Investors apparently became less averse to risks,” Nagayuki Yamagishi, equity strategist at Mitsubishi UFJ Securities Co., said. But wariness persistent, since specifics of the RTC-style agency were not yet known, he said.(MORE)Tokyo Stocks Rally on Hopes for U.S. Bad Debt Cleanup

Winners beat losers 1,186 to 479 on the TSE’s first section, while 54 issues ended unchanged.

Volume came to 2,633 million shares, against Thursday’s 2,335 million shares.

Brokers said the market is expected to stay unstable in the near term since U.S. financial troubles are far from being resolved and industry realignment is seen intensifying.

As for the proposed RTC-style agency, the process of getting rid of bad loans is expected to be “lengthy, cumbersome and costly,” Mitsubishi UFJ’s Yamagishi said, noting Japan needed to make use of both Resolution and Collection Corp., a state-affiliated bad loan collector, and the Bank of Japan to sort out its bad loan mess.

Hiroaki Kuramochi, head of the equity department at Tokai Tokyo Securities Co., said the Tokyo market’s outlook is murky because Japan is expected to see a political vacuum before the anticipated general elections this autumn. Foreign investors’ appetite is unlikely to increase for the time being, he pointed out.(MORE)Tokyo Stocks Rally on Hopes for U.S. Bad Debt Cleanup

Financial issues jumped on a wide front. Mizuho Financial Group and Resona Holdings scored their daily limit gains.

Steelmakers including Nippon Steel and JFE chalked up hefty gains following a report by the Nikkei business daily that ArcelorMittal, the world’s biggest steelmaker, is considering cutting production toward the end of this year.

Real estate developers Sumitomo Realty, Mitsubishi Estate and Mitsui Fudosan gained ground, despite a newly reported fall in Japan’s commercial land prices this year.

Defensives fared poorly, among them drug makers Astellas and Shionogi and utilities Tokyo Electric and Kansai Electric.

In index futures trading on the Osaka Securities Exchange, the key December contract on the Nikkei average finished up 470 points at 11,880.END

(c) 2008 Jiji Press English News Service. Provided by ProQuest LLC. All rights Reserved.