On Monday (4th March), Japan’s benchmark Nikkei surpassed 40,000 points for the first time, boosted by a rise in technology equities. The Nikkei share average was recently up 0.7% to 40192.48.
The surge in Japan’s technology equities coincided with the continued artificial intelligence boom in US stocks, which lifted the S&P 500 and Nasdaq to new highs overnight on Friday.
On Monday, the blue-chip index surged by up to 1% to 40,301.30, setting a new intraday high. Tech stocks, which have helped propel shares higher over the last year, have led the way, with Advantest Corp. among the best performances.
Topix index
The wider Topix index also climbed, although it is still around 6% behind the high set more than three decades ago, when Japan’s asset-price bubble burst. Both the Nikkei and the Topix received support from US consumption statistics, adding to views that the Federal Reserve may be able to decrease interest rates as early as June, boosting global mood.
“The Nikkei 225’s 40,000 is certainly a key psychological level, which could provide some resistance to the index and cause volatility,” said Charu Chanana, a strategist at Saxo Capital Markets located in Singapore. “But when structural factors remain in favour, and yen weakness continues, it is likely to be more a bullish signal rather than fueling any concerns of Japanese stocks being overbought.”
Japan’s stock market since 1989
Japanese stock markets have reached new highs for the first time in 34 years, surpassing the 1989 record last month, supported by foreign inflows amid corporate governance reform, low valuations, a cheaper currency, and soaring corporate earnings.
Furthermore, Warren Buffett’s support for Japanese trading houses last year bolstered trust in the country’s market, while fears about a downturn in China pushed many investors to shift to Japan, Bloomberg said.
Foreign investors remain optimistic about Japanese equities. BlackRock Inc., the world’s largest asset manager, and Amundi Asset Management, Europe’s largest money manager, predict that profits growth and reforms in corporate governance will keep the momentum going.
The Tokyo Stock Exchange is also urging corporations to file papers outlining their goals to increase equity values. Some have announced share repurchases and dividend increases. Management buyouts are on the upswing, and activist investors are ramping up their efforts, according to the Bloomberg study.
Approximately one-third of Nikkei businesses, excluding the banking sector, have a net cash position, which means they have more cash than debt, supporting the cause of activist investors and the TSE. That is about double the corresponding figure for the S&P 500.
