It was hardly a bullish day, but given the light volume, in fact the lightest trading this year, we think it was a positive session overall. Today was the last chance to buy stocks paying a year-end dividend (ex-dividend from tomorrow).
TOPIX 1st section advancers outnumbered decliners 1.5:1, or 959 x 618.
The dollar climbed above 118/US$ proving all the carry trade worrywarts wrong again. Due to the yen’s relative weakness it looks like Japanese ADRs and ETFs will have limited upside, in spite of any upside in their ordinaries. iShares MSCI Japan Index (EWJ) is trading lower by about 0.7% to $14.80 in early morning action.
Sony (SNE), which was given a share target price upgrade by Deutsche Bank Securities, to 7,100? ($60.17 at 118/$1; from 6,400?) is down 0.3% to $52.95 in early trading. Its ordinary shares (JP:6758) gained 0.5% to 6,260? ($53.05). The target hike represents about 13% upside from today’s ordinary close.
We are not excited about Sony here, despite all the analyst attention early in ’07. It has had a nice run-up. However, we expect it could sell-off heavily on marginally negative stock-specific, or market-wide impacting news and Matsushita (MC) (JP: 6752) could be the recipient of such Sony out-flow, based on a comparatively attractive P/E valuation. Still, even Matsushita is pricey, especially on a trailing basis, currently near 36x.
The news last Friday that GE will make a 3,250? cash tender offer for Sanyo Electric Credit (JP: 8565) sent its shares up their daily limit at just under 20%. GE is effectively paying a 60+% premium over their Friday close of 2,010?.
At this point we don’t fully understand the need to pay such a premium. However, it may be in order to ensure a successful tender, without the intervention of rival bids or a white knight, if one even exists.
Also, it could be in reaction to the hedge funds picking up shares of Nikko Cordial (NIKOY.PK) (JP: 8603) and standing firm against Citigroup’s (C) tender offer (including its revised offer by 26% to 1,700?).
Nikko closed at 1,688? today on one of its lightest trading days over the past month. It has yet to trade at, or above 1,700?. We do not own shares, however if we did, we would consider taking some profit at this point.
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