Japanese stocks rose this week, led by banks such as Mizuho Financial Group Inc, on optimism the economy will expand faster in the second quarter than a government prediction and help reduce lenders' bad loans.
The Topix Index rose 1.6 percent in the past five days, completing its second winning week. Bank stocks accounted for more than a quarter of the advance. The Nikkei 225 Stock Average added 0.6 percent in its fifth week of gains.
"Japan is one the great investment opportunities in a generation," Mark Pignatelli, who helps manage the equivalent of US$160 billion at Schroders Plc in London, told Bloomberg News in a television interview. "The investment case in Japan lies critically with the improvement in non-performing loans and capital expenditure discipline."
Hong Kong and Singaporean stocks fell this week after Singapore reported a new case of SARS, raising concern about a fresh outbreak of the disease that slowed economic activity, causing both economies to post record contractions in the April-June quarter.
Hong Kong's Hang Seng Index had its biggest weekly decline in a month, while Singapore's Straits Times Index dropped for a second week in three.
The Topix Banks index climbed 5.8 percent this week. It has been the best performer among the Topix's 33 industry groups in the past month, rising 25 percent.
JAPAN
Mizuho, the nation's largest lender by assets, surged 16 percent to ?190,000 in the past five days. Sumitomo Mitsui Financial Group Inc, Japan's second-biggest bank, rallied 10 percent to ?464,000.
Japan's lenders were saddled with some ?44.5 trillion (US$380 billion) in bad debt as of March 31, according to government figures.
In Japan, real GDP, which is adjusted for price fluctuations, rose 1 percent in the second quarter, its fastest pace in 2 1/2 years. The expansion was almost double the 0.6 percent gain reported last month, the Cabinet Office said Thursday.
Accelerating economic growth may hasten restructuring efforts by Prime Minister Junichiro Koizumi's administration and enable the Topix to reach 1400 next year, Morgan Stanley said in a note to clients this week.
Morgan Stanley recommended investors to increase their allocation in Japanese equities to 11 percent, compared with a 9 percent weighting in the Morgan Stanley Capital International All-Country World index.
"Global money managers really risk underperforming by not investing in Japan right now," said Angelo Corbetta, who helps oversee US$120 billion globally as the Singapore-based head of Far East investments at Pioneer Investment Management Ltd. Rising share prices are "building on better sentiment for the domestic side" of the economy.
The Nikkei and the Topix on Thursday both had their biggest declines in two months.
Advantest Corp, the world's No. 1 maker of equipment used to test memory chips, slumped 3.4 percent to ?7,970 in the past five days. Kyocera Corp, the world's largest maker of ceramic packaging used to protect finished microchips, lost 3.3 percent to ?7,530 in the week.
The two companies, the Nikkei's second and third-biggest constituents, make at least half of their sales overseas.
HANG SENG, SINGAPORE
The Hang Seng Index fell 2.6 percent this week, its biggest drop since the period ended Aug. 8. The Hong Kong stock market was closed yesterday for a public holiday. Singapore's Straits Times Index dropped 2.1 percent in the past five days.
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