Mar 4 2024: Japan’s primary stock index breached the 40,000-point milestone for the first time on Monday, closing at a historic high. This surge in the Nikkei share average reflects a combination of corporate governance reforms and robust valuations, fueling sustained interest from global investors.
Buoyed by a rally in technology stocks akin to their U.S. counterparts, the Nikkei concluded the day with a 0.5% increase, reaching 40,109.23 points. Following five consecutive weeks of gains, the index soared past the previous intraday peak of 39,990.23 recorded on Friday, briefly hitting 40,314.64 before moderating in the afternoon.
“While short-term fluctuations are possible as market activity intensifies, I anticipate a continued upward trend,” remarked Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. He noted the significant involvement of overseas investors, many of whom are adopting a medium- to long-term investment approach.
Analysts foresee further growth in Japanese equities this year, citing enduring shifts in corporate behavior. A recent Reuters poll, conducted on February 22, revealed optimistic projections, with some forecasts suggesting the Nikkei could climb as high as 43,000 points by year-end, although the median forecast stood at 39,000.
While foreign interest has been instrumental in propelling the Nikkei’s rapid ascent, there are signs of a gradual shift among domestic retail investors, traditionally less engaged with Japanese stocks. Notably, purchases of Japan-focused exchange-traded funds eligible for local tax incentives have surged, indicating a potential increase in domestic market participation over time, according to Wei Li, portfolio manager at BNP Paribas Asset Management.
Monday witnessed a surge in Japanese tech stocks, buoyed by the ongoing AI fervor in U.S. markets, which propelled the S&P 500 and Nasdaq to record highs on Friday. Advantest, a chip-testing equipment manufacturer with ties to U.S. AI giant Nvidia, surged by 3.7%, while Tokyo Electron, a major chip-making equipment provider, gained 2.4%, collectively contributing 160 index points to the Nikkei’s 198-point rise.
Renesas Electronics, a Japan-based semiconductor manufacturer, emerged as the top performer of the day, climbing 4.9%. Additionally, JSR Corp, a leading producer of photoresists utilized in chip fabrication, surged by 4.8% following reports of a potential tender offer by state-backed fund Japan Investment Corp (JIC) later this month.
In contrast, the broader Topix index concluded the day marginally lower, down 0.1% at 2,706.28 points.\
