As Nikkei hits record high surpassing 1989 peak, Uday Kotak shares 2 takeaways from index’s 35 year journey
(formerly Twitter). Nikkei has surged about 52% from its January 2023 trough, supercharged by a tech-rally, cheap valuations and corporate reforms that lured foreign money amid a weak yen. Also Read: Japanese Stocks Look Different - and Better - than in the 1980s The rally in Nikkei comes despite a recession in Japan, global geopolitical uncertainties and rising interest rates and inflation.
A weak yen has boosted Japanese exporters’ earnings, supporting the markets, after decades of lacklustre performance. Japanese stocks’ forward price-to-earnings ratio rose above 50 in the bubble era, and is currently at 20.5 for the Nikkei, compared with 25 for Nasdaq and 20.4 for S&P 500 index, according to Refinitiv data. Along with these, corporate governance changes in Japan have also made its markets more attractive for foreign investors.
Foreign investors poured in 6.3 trillion yen ($42 billion) in the equity market last year. They spent a net 1.16 trillion yen in Japanese equities in January, Reuters reported. On Thursday, gains on Nikkei were led by chip-related stocks tracking overnight rally in US chipmaker Nvidia shares after its outlook beat market expectations.
Among stocks, Tokyo Electron shares soared 6%, while chip-testing equipment maker Advantest jumped 7.5%. Screen Holdings rallied over 10%, while SoftBank Group shares rose more than 5%. Electric machinery rose 2.4% to be the biggest gainer among the Tokyo Stock Exchange's 33 industry sub-indexes.
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