Nikkei and Topix Indexes Hit Record Highs Amid Tech Rally and A.I. Frenzy
On Thursday, the Nikkei Stock Average reached a historic high, driven by Japanese tech stocks amid the U.S. artificial intelligence boom.
The benchmark rose 332.89 points, or 0.82%, closing at 40,913.65, surpassing its previous high set on March 22. It peaked at 40,971.23, near its all-time intraday high of 41,087.75.
The Tokyo Stock Price Index (Topix) also hit a new high, closing at 2,898.47, surpassing its record from December 1989.
The S&P 500 and Nasdaq in the U.S. have been reaching new highs due to an AI stock rally and expectations of the Federal Reserve lowering rates in September.
Shuji Hosoi, a senior strategist at Daiwa Securities, attributed the rise in Japanese stocks to U.S. stock gains and growing demand for AI chips.
He also cited increased production by memory chip manufacturers and a spillover effect on material manufacturers.
Despite the weak yen benefiting exporters but hurting domestic demand, Hosoi predicts a shift.
He expects real wage growth to turn positive between July and September, boosting domestic demand in the second half of the year.
The weak yen should continue increasing profits for companies with foreign demand.
Masatoshi Kikuchi, chief equity strategist at Mizuho Securities, noted foreign investors driving Japan’s stock rally, overlooking the yen’s weakness.
The Topix index, surpassing its bubble-era peak, reflected broad-based buying momentum.
It rose 0.9% to 2,898.47, with almost all 33 industry sub-indexes, including automakers, insurers, and banks, showing gains.
Japanese Stocks on the Rise
Andrew Jackson, head of Japan equity strategy at Ortus Advisors, noted that the initial gains from the exporter and tech-heavy Nikkei index made the Topix’s catch-up unsurprising.
Both indexes surged over 25% last year as global funds flowed into the market, attracted by low borrowing costs, booming profits, and efforts to improve corporate governance.
Despite the BOJ’s delay in reducing bond buying, Japanese stocks remain a preferred market in Asia. A Bank of America survey highlighted corporate governance improvements as a key theme.
The Tokyo Stock Exchange’s plans to revamp the Topix index are expected to pressure companies to enhance governance further.
Recent annual general meetings saw activists achieve victories, signaling a shift in corporate governance.
Shareholders of clothing firm Daidoh Ltd. supported three board candidates proposed by the Japanese fund Strategic Capital Inc.
Toyo Securities Co.’s president had to withdraw his reappointment candidacy due to a lack of shareholder support.
The Topix index’s movement indicates a broader market recovery and record highs for Japan’s market as a whole.
Hideyuki Ishiguro, chief strategist at Nomura Asset Management Co., noted this.
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