Japan's Nikkei Stock Average exceeded the psychological level of 40,000 yen for the first time, opening the door to further gains in the historic bull market.
The blue chip gauge rose as much as 1% to 40 314.64, setting a new intraday record. The index was led by tech stocks, which have contributed to the rise in stock prices over the past year, with Advantest also making the list.
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Domestic investors accelerated the move on Monday, joining global funds that have been a major driver of the rally. SBI Securities, Japan's largest online securities company, announced that its stock trading app temporarily crashed as a flood of customers tried to log in.
Charu Chanana, a strategist at Singapore-based Saxo Capital Markets, said: “The Nikkei 225 yen 40,000 yen is certainly an important psychological level and could create some resistance for the index and lead to volatility. ” he said. “However, if structural factors remain favorable and the yen continues to weaken, it is likely to send a bullish signal rather than fueling concerns that Japanese stocks are overbought.”
The broader Topix index oscillated between slight gains and declines. And although it is trending upward, it is still about 6% below the record set more than 30 years ago, before Japan's asset price bubble burst.
The Nikkei Stock Average returned to its 1989 high last month as investors from around the world flocked to Japan's largest companies in search of higher shareholder returns, a weaker yen, and stronger corporate profits.
Warren Buffett's support for Japanese trading companies last year boosted confidence in the Japanese market, and many funds moved their money to Japan due to concerns about China's economic slowdown.
The Nikkei stock average was slow to move after reaching a milestone on February 22, as investors booked profits and some analysts expressed surprise at the speed of the rise. However, the downside was limited as investors bought on the dip.
There are also concerns that the stock market is overheating.
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Ayako Sera, a market strategist at Sumitomo Corporation, said, “The Nikkei average of 40,000 yen is a passing point, but the pace is too fast and the level is a little too fast for the economy and the actual performance of companies to catch up.'' Mitsui Trust Bank. “Economic growth is like a long marathon, and the stock market moves so fast that it can easily run out of breath.”
Still, many overseas investors remain bullish on Japanese stocks. BlackRock, the world's largest asset manager, and Amundi Asset Management, Europe's largest asset manager, expect profit growth and changes in corporate governance to remain strong.
The Tokyo Stock Exchange encourages companies to publish reports on their plans to improve stock valuations. Some companies have announced stock buybacks and dividend increases. Management buyouts are on the rise, and activist investors are stepping up their campaigns.
Data released on Monday showed that business confidence is improving. Japan's capital investment in products excluding software surged in the final quarter of 2023. Meanwhile, Kyodo News reported over the weekend that the Japanese government is considering calling for a formal end to deflation.
“This is not baseless enthusiasm,” said Masahiro Yamaguchi, senior market analyst at SMBC Trust Bank, citing the healthy economic and corporate backgrounds of both Japan and the United States.
© 2024 Bloomberg