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Japanese ADRs trading on the NYSE/NASDAQ added to the prior week's gains, but have only moved a combined 1% to the upside in the past two weeks. Financial stocks were hot, claiming four of the top-five weekly advancer spots.

Japanese stocks rallied last Monday as the Nikkei closed near 17,670, its highest close in about a month; however it failed to hold the gains through the end of week.

We start this week off with another rally, as the Nikkei 225 gained 0.7% to 17,677. Exporters and some financial stocks were in favor, but overall, the market was balanced, hurt by domestic demand stocks, including smaller caps.

On average, the 28 Japanese ADRs gained a combined 0.4% last week. For the year, they remain slightly in positive territory, up a combined average 1.4%.

Average weekly Japanese ADR returns over the past several weeks:

    04/27 - 05/04: +0.6%
    04/20 - 04/27: -1.8%
    04/13 - 04/20: +1.5%
    04/05 - 04/13: -2.1%
    03/30 - 04/05: +1.3%
    03/23 - 03/30: -1.6%
    03/09 - 03/16: -1.9%
    03/02 - 03/09: +0.6%

See the chart at the bottom for weekly and year-to-date returns.

The five best performing ADRs last week:

    1. Mitsui & Co. (OTCPK:MITSY) 7.1%
    2. Nomura (NYSE:NMR) 6.3%
    3. Mitsubishi UFJ (NYSE:MTU) 5.8%
    4. Mizuho FG (NYSE:MFG) 5.7%
    5. ORIX (NYSE:IX) 4.6%

The five worst performing ADRs:

    1. NIS Group (NIS) -6.7%
    2. Internet Initiative Japan (NASDAQ:IIJI) -5.0%
    3. Konami (NYSE:KNM) -4.5%
    4. Nidec (NYSE:NJ) -2.9%
    5. Makita (OTCPK:MKTAY) -2.5%

Disclosure: The author owns shares of NIS Group and IIJ and also owns IIJ call options.

Click to enlarge chart

Japan-ADRs-wkly-ytd-05-11-07

The weekly gains for two of Japan's three largest mega banks, Mitsubishi UFJ (MTU) and Mizuho (MFG), brought them from double to single digit losses year-to-date. This may be a turning point, as bank stocks have lagged for more than a year now. However, without further BoJ rate hikes and a strong domestic stock market, it is hard to get excited about bank stocks. Note both Mitsubishi and Mizuho report fiscal year-end earnings next Tuesday. Some of the recent buy interest can possibly be attributed to expectations of higher dividend payouts.

Auto stocks have been under selling pressure in '07, but it appears they too may have reached a bottom. Ordinary shares of Nissan (JP: 7201) (OTCPK:NSANY) gained 4.5% in Monday trading, followed by Toyota (JP: 7203) (NYSE:TM) +2.4% and Honda (JP: 7267) (NYSE:HMC) +1.2%. See the hyperlinked post for my thoughts on Japan's Big-3, as well as my picks, as all three were down double-digits as of Friday's close.

Despite the weakness in IIJ (IIJI) and NIS Group (NIS), I'm maintaining my positions and considering adding at current levels. NIS issued pretty solid guidance for the current fiscal year and for the three year period as it exits the troubled consumer finance industry. IIJ seems really oversold, unless there's something insiders or institutional investors know that they are not sharing ahead of its earnings announcement tomorrow.

Source: Japan: Best and Worst Performing ADRs Last Week and YTD