Japanese stocks climbed after UBS AG said it will receive a capital injection, boosting speculation the worst may be over from credit-market losses and that the global economy will continue to expand.
Orix Corp, which dropped by as much as 36 percent since the end of July amid speculation it held subprime investments, rose to the highest in five weeks. Mitsubishi Corp led gains by so-called cyclical shares, whose earnings are most sensitive to economic growth.
UBS, Europe's largest bank by assets, said yesterday that it will get US$11.5 billion in new capital after a comparable writedown on subprime investments. Shares also gained in Tokyo on speculation the US Federal Reserve would cut interest rates at its meeting later yesterday.
The Nikkei 225 Stock Average advanced 120.33, or 0.8 percent, to 16,044.72 at the close of trading, the highest since Nov. 7. The broader Topix index rose 8.51, or 0.6 percent, to 1,567.02, a level not seen since Nov. 6.
"Many investors thought the subprime problem would throw financial markets into chaos, so the boost to UBS's capital base is a positive sign for the market," said Masaru Hamasaki a senior strategist at Toyota Asset Management Co, which oversees US$3.3 billion in Tokyo. "We're not going to be able to resolve the concerns about financial markets in an instant, but I think we can be confident about the domestic banks."
Orix, Japan's largest non-bank financial company, surged &ye n;1,230, or 5.6 percent, to &ye n;23,330, the highest close since Nov. 1. Mitsubishi UFJ Financial Group Inc., which had more than US$2 billion in subprime-related investments at the end of September, advanced &ye n;8, or 0.7 percent, to &ye n;1,228.
UBS plans to boost its capital base by US$11.5 billion from Government of Singapore Investment Corp. and an unidentified Middle Eastern investor by selling them bonds that will convert into shares, Chairman Marcel Ospel said yesterday.
The financial conglomerate said it will write down an additional US$10 billion on securities losses in addition to a US$4.66 billion markdown announced earlier this year. The company's shares rose 1.4 percent in Switzerland.
"Asian banks will outperform because people have finally realized that there is a significant difference in terms of subprime exposure between Asian commercial banks and US investment banks," said Masahiko Ejiri who helps oversee US$26 billion at Mizuho Asset Management Co in Tokyo.
Mitsubishi Corp, Japan's largest trading house, surged &ye n;190, or 6.1 percent, to &ye n;3,330.
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