Active Investing in Japan

� Japanese stocks had a solid holiday-shortened week with outsized gains on Thursday. However, TOPIX 1st section was mostly flat and the Nikkei closed slightly lower as Q3 came to an end Friday. Some market participants worry if the buying ahead of quarter’s end was merely “window dressing.”

� The Bank of Japan [BoJ] releases its tankan on Monday. Positive readings are welcomed considering negative CPI and the rise in unemployment.

� Nikkei 225 futures (December) trading in Chicago lost 195 points (-1.2%) to 16,765; U.S. indices traded to the downside Friday: Dow -0.1%, S&P 500 -0.3%, Nasdaq -0.3%

� Mitsubishi UFJ (NYSE: MTU) (JP: 8306) resumes trading Monday after being halted a week for its 1,000:1 stock split.

Japan market summary for Friday (Sept. 28)
Nikkei 225 Stock Average: -46.53 (-0.3%) to 16,785.69
Nikkei 225 futures Osaka: -30 (-0.2%) to 16,830, Singapore (SGX) -20 (-0.1%) to 16,825, Chicago (CME) *9/27 +355 (+2.1%) to 16,960
TOPIX: +1.47 (+0.1%) to 1,616.62; Advancers 720 x decliners 881 (unch. 118), New highs 15 x new lows 16
Jasdaq: +6.94 (+0.4%) to 1,861.32
Yen: strengthened about 0.1% against US$ to 115.35 level late Fri. in Tokyo; weakened about 0.1% to 163.40 level against euro
Notes: Emerging indices MOTHERS and HERCULES posted gains again, 1.7% and 0.4%, respectively. The Nikkei was up over 100 points early, but closed lower, due again to profit-taking after the big jump Thursday and three-straight positive closes in a holiday-shortened week. There appears to be more buy interest in domestic equities these days, but will it last …? The financial sector remains volatile.

Japan market summary for Thursday (Sept. 27)
Nikkei 225 Stock Average: +396.48 (+2.4%) to 16,832.22, highest close since Aug. 14
Nikkei 225 futures Osaka: +360 (+2.2%) to 16,860, Singapore (SGX) +350 (+2.1%) to 16,845, Chicago (CME) *9/26 +205 (+1.25%) to 16,605
TOPIX: +39.13 (+2.5%) to 1,615.15; Advancers 1,510 x decliners 169 (unch. 40), New highs 32 x new lows 9; all 33 sectors posted gains
Jasdaq: +25.19 (+1.4%) to 1,854.38
Yen: weakened about 0.3% against US$ to around 115.45 level late in Tokyo; weakened about 0.4% against euro to 163.25 level
Notes: Very bullish trading and broad gains as the TOPIX recovered the 1,600 level and then some. TOPIX 1st and 2nd sections extended gains into a third session; TOPIX 2nd section had its best day of the calendar year. Foreign buying as well as short covering (seemingly including foreign investors) fueled the rally. There were reports end of the quarter “window dressing” is partially attributable to the rally. MOTHERS and HERCULES posted outsized gains again, +5.5% and +5.6%, respectively.

Let the Nissan GT-R countdown begin.

Nikkan Kogyo reports Nissan (NSANY) (JP: 7201) CEO Carlos Ghosn will unveil the highly anticipated Nissan GT-R on Oct. 24 at the Tokyo Motor Show press day. Nissan is now taking pre-orders. The GT-R is said to be priced from the upper 7 million yen (approx. US$65,000+ at 115/1) range. Nikkan Kogyo notes Honda (HMC) (JP: 7267) and Toyota (NYSE: TM) (JP: 7203) are also investing in sports cars and Japan’s Big-3 attempt to take control of the domestic sports car market from overseas sports car makers. The GT-R is making a come back after it was last sold on a limited basis in early 2002. Sales will begin in Japan from December. Nikkan Kogyo mentions the GT-R carries on the “Skyline” pedigree (scroll down the linked page for video clips) but will be sold worldwide as “Nissan GT-R” in order for Nissan to build brand recognition. Ordinary shares of Nissan were last up 1.7% to 1,139 yen in early trading as the broader market is in rally mode.

Japan market summary for Wednesday (Sept. 26)
Nikkei 225 Stock Average: +34.01 (+.02%) to 16,435.74
Nikkei 225 futures Osaka: +70 (+0.4%) to 16,500, Singapore (SGX) +45 (+0.3%) to 16,495, Chicago (CME) *9/25 -15 (-0.1%) to 16,400
TOPIX: +9.19 (+0.6%) to 1,576.02; Advancers 1,240 x decliners 385 (unch. 94), New highs 31 x new lows 60
Jasdaq: +17.18 (+0.9%) to 1,829.19
Yen: weakened about 0.4% against US$ to 115.15 level late in Tokyo; weakened about 0.6% against euro to 162.60 level
Notes: Japan’s August trade surplus surprised big to the upside, nearly quadrupling year-over-year to a US$ equivalent of $6.5B, as exports climbed 14.5%, beating 11.8% growth in July and economists’ average forecast of 10.9%. Strengths were in autos and steel, especially to China, the broader Asia region and the EU. Auto stocks didn’t perform well, however, as concerns over a U.S. slowdown weighed on investors. Toyota (NYSE: TM) (JP: 7203) warned its Sept. U.S. sales may disappoint after 25% growth last year. The biggest gains of the day were concentrated among Japan’s “emerging” smaller cap stocks, led by an 8.1% jump in the MOTHERS and +4.6% in the
HERCULES indices.

Japan market summary for Tuesday (Sept. 25)
Nikkei 225 Stock Average: +89.12 (+0.5%) to 16,401.73
Nikkei 225 futures Osaka: +160 (+1.0%) to 16,430, Singapore (SGX) +185 (+1.1%) to 16,450, Chicago (CME) *9/25 -15 (-0.1%) to 16,400 [9/24 +15 (+0.1%) to 16,415]
TOPIX: +14.76 (+1.0%) to 1,566.38 ; Advancers 907x decliners 699 (unch. 112), New highs 19 x new lows 248; 26/33 sectors posted gains
Jasdaq: -7.37 (-0.4%) to 1,812.01
Yen: strengthened about 0.5% to 114.70 level against US$ late in Tokyo; strengthened about 0.4% against euro to 161.55 level
Notes: First positive close in three sessions for TOPIX. Nikkei traded lower initially (due to dividends having gone ex-rights) but rallied into the afternoon, led by bullish N225 futures trading. Positive close of nearly 90 points for Nikkei includes overcoming about 70 – 80 points (Nikkei Shimbun est. 76p) for dividend adjustment. TOPIX 2nd Section also closed in positive territory for the first time in three. Mitsubishi UFJ FG (MTU) (JP: 8306) is halted this week for a 1,000:1 stock split; trading resumes Monday.

Markets were closed in Japan Monday for a national holiday. The big news for the moment is the election of Yasuo Fukuda to replace Shinzo Abe as prime minister. Below is an abstract from FT Alphaville’s 6am Cut. There were only two choices, so no chance of a real surprise, thus the market reaction is likely neutral to slightly bullish, just because Abe is out of the picture. However, the underlying economic and political problems don’t go away so easily and instead continue to loom over equities. Not to mention the external worries, such as the impact of the U.S. economy (subprime, real estate, consumer credit and spending) on exporters.

Yasuo Fukuda will succeed Shinzo Abe as Japan�s prime minister following his election Sunday as president of the ruling LDP. The party is hoping that the moderate conservative, the first prime minister whose father was also premier, can distance the party from a disastrous year under Mr Abe and rescue its electoral credibility. Mr Fukuda, 71, is due to be installed as prime minister following a vote in Japan’s parliament Tuesday.

Japan market summary for Friday (Sept. 21)
Nikkei 225 Stock Average: -101.18 (-0.6%) to 16,312.61
Nikkei 225 futures Osaka: -110 (-0.7%) to 16,270, Singapore (SGX) -115 (0.7%) to 16,265, Chicago (CME) *9/20 -265 (-1.6%) to 16,215 ** 9/21 +185 (+1.1%) to 16,400
TOPIX: -14.77 (-0.9%) to 1,552.07; Advancers 488 x decliners 1,142 (unch. 95), New highs 9 x new lows 242; 10/33 sectors posted gains
Jasdaq: -8.11 (-0.4%) to 1,819.38
Yen: strengthened about 0.2% against US$ to 115.20 – 115.25 level late in Tokyo; mostly flat against euro around 162.15 level
Notes: First decline in three sessions, partially blamed on US stocks trading lower and a stronger yen. Continued broad weakness in financial sector including bank and consumer credit stocks. Stocks went ex-dividend (interim dividend) — seen impacting Nikkei 225 by about 0.5% or 70 to 80 points; selling of high dividend paying stocks expected. The market is closed Monday for a national holiday; trading resumes Tuesday.

Japan market summary for Thursday (Sept. 20)
Nikkei 225 Stock Average: +32.25 (+0.2%) to 16,413.79
Nikkei 225 futures Osaka: +10 (+0.1%) to 16,380, Singapore (SGX) +15 (+0.1%) to 16,380, Chicago (CME) *9/19 +180 (+1.1%) to 16,480
TOPIX: -0.74 (-0.0%) to 1,566.84; Advancers 653 x decliners 975 (unch. 97), New highs 15 x new lows 127; 17/33 sectors posted gains
Jasdaq: -3.85 (-0.2%) to 1,827.49
Yen: strengthened about 0.3% against US$ to 115.5 level, weakened about 0.4% against euro to 162.15 level

Japan market summary for Wednesday (Sept. 19)
Nikkei 225 Stock Average: +579.74 (+3.7%) to 16,381.54; biggest one-day gain since March 4, 2003
Nikkei 225 futures Osaka: +590 (+3.7%) to 16,370, Singapore (SGX) +540 (+3.4%) to 16,365, Chicago (CME) *9/18 +295 (+1.8%) to 16,300
TOPIX: +56.63 (+3.75%) to 1,567.58; Advancers 1,626 x decliners 70 (unch. 29), New highs 14 x new lows 51
Nikkei Jasdaq: +13.10 (+0.7%) to 1,831.34
Yen:weakened about 0.6% against US$ to around 115.80 level, weakened about 1.2% against euro to around 161.60 level
Notes:Stocks obviously boosted by the big rally in the U.S. induced by FOMC cutting 0.5% from federal-funds and discount rates. Better-than-expected earnings from Lehman Bros. (LEH) helped the likes of financial stocks. A weaker yen is always cited for bullishness among exporters. Bank of Japan held the benchmark rate at 0.5%, as expected.