Japan’s Nikkei 225 hits key 40,000 level
TOKYO: Japan’s Nikkei 225 Stock Average climbed above the psychological level of 40,000 for the first time, opening the door to further gains in its historic rally.
The blue-chip gauge rose as much as 1% to 40,314.64, a fresh intraday record. Tech shares, which have helped push equities higher over the past year, were leading the way, with Advantest Corp among the top performers.
Domestic investors helped fuel the move yesterday as they joined global funds, which have been the main drivers of the rally. Japan’s biggest online broker, SBI Securities Co, said its stocktrading app briefly crashed as a flood of customers attempted to log in.
“The Nikkei 225’s 40,000 is certainly a key psychological level, which could offer some resistance for the index and bring volatility,” said Charu Chanana, strategist at Saxo Capital Markets based in Singapore. “But when structural factors remain in favour, and yen weakness continues, it is likely to be more a bullish signal rather than fuelling any concerns of Japanese stocks being overbought.”
The broader Topix index swung between small gains and losses. It has also been in an upswing but remains about 6% below the record it set more than three decades ago before Japan’s asset-price bubble burst.
The Nikkei reclaimed its 1989 peak last month as investors from around the world piled into Japan’s biggest companies on improving shareholder returns, the weaker yen and booming corporate profits.
Warren Buffett’s endorsement of Japanese trading houses last year boosted confidence in the nation’s market, and concerns over a slowdown in China prompted many funds to switch into Japan.
‘NOT GROUNDLESS FRENZY’
Moves in the Nikkei had been subdued after it reached the milestone on Feb 22, as investors took profits and some analysts voiced surprise at the speed of the rally. Yet downside was limited as investors came in to buy on dips.
There are some concerns the stock market may be overheating.
“While 40,000 yen for the Nikkei 225 is a passing point, the pace is too fast and the level is reached a little too early for the economy and companies’ actual performance to keep up with,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank. “The growth of the economy is a long-distance marathon, and the stock market has run so rapidly that it might lose its breath soon.”
Still, many foreign investors remain bullish on Japanese stocks. BlackRock Inc, the world’s biggest asset manager, and Amundi Asset Management, Europe’s largest money manager, expect earnings growth and changes in corporate governance will keep the strength going.
Companies are being encouraged by the Tokyo Stock Exchange to publish reports on their plans to boost equity valuations. Some have announced share buybacks and dividend hikes. Management buyouts are on the rise and activist investors are also stepping up their campaigns.
Data released yesterday showed business sentiment is improving. Japan’s capital spending on goods excluding software jumped in the final quarter of 2023. The nation’s government, meanwhile, is considering calling an official end to deflation, Kyodo reported over the weekend.
“This is not a groundless frenzy,” said Masahiro Yamaguchi, senior market analyst at SMBC Trust & Banking Ltd, citing the healthy economy in Japan and the US.