Japanese Robot Makers Surge on China Wage Increase

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In Asia Thursday Japan's Nikkei 225 Index climbed 1.1% to 9,543 and Hong Kong's Hang Seng Index crept up 0.1% to 19,633. In China the Shanghai Composite Index slipped 0.8% to 2,563.

Increasing wages in China gave a huge boost to Japanese automation company SMC, which surged 7.1% and industrial robot maker Fanuc, which leaped 6.2% in today's trading.

China's factories have been pumping out low cost goods as a result of cheap labor. In the boomtown of Shenzhen, for example, factory workers, who are paid on the higher end, receive a minimum wage of just 1,000 yuan ($146) per month.

But a round of wage hikes, spurred in part by suicides at Foxconn, could threaten the appeal of producing products in the region. Foxconn employees will now receive a minimum of $300 per month and other companies are following suit. Minimum wage earners in Beijing have just received a 20% raise to $140 per month, according to etftrends.com. These costs will raise production costs and investors are betting that automation will be the key to keeping costs low. They're predicting orders to pour into automation companies.

Chiyoda Corp., whose services include automation, advanced 2.5% and their Japanese shares picked up traction after news that Japan's economy grew faster than expected. Nitori, a furniture seller, jumped 4.4% and Daikin Industries, an air-conditioner maker, gained 1.7%. Dentsu, the country's most high-profile ad agency, jumped 2.6%.

In Hong Kong, energy companies rose on expectations that higher factory output in China will boost demand. China Coal Energy advanced 3% and International Power Generation added 2%. Cnooc, Hong Kong's oil exploration darling, shot up 2.6%.

A rise in the value of the Euro sent retailer Esprit, which depends on European markets for much of its revenue, rebounding 3.7%. Li & Fung, which supplies cheap toys and clothes to shops around the world, advanced 1%.

Online gaming company Tencent, which trades in Hong Kong but does business in China, slumped 7.3%. According to DigiCha.com (Internet and Digital Media in China), there are fewer newcomers to the online gaming market, partly due to the fact that new Internet users are often older and not interested in online games, and also thanks to stiff competition from a number of new gaming companies.

But all the good export news didn't spill over to Chinese property shares. Data showing that home prices in major cities increased 12.4% in May as compared with last year spurred new fears of new monetary tightening measures including new property taxes. Gemdale slumped 3.3%, Poly Real Estate tumbled 2.2% and China Vanke sank 2.1%.
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