Nikkei powers to Japan's 1990 'bubble' era peak (updated)

L1

19/05/2023 07:28

(Adds investor comment in 13th paragraph, updates with closing
prices)
    By Kevin Buckland
       TOKYO, May 19 (Reuters) - Japan's stock benchmark
rallied on Friday to the highest since August 1990, the
country's "bubble" era, driven by a confluence of positive
factors from strong earnings to an economy showing signs of
revving up and optimism over a U.S. debt ceiling deal.
    The Nikkei benchmark index  .N225  jumped as high as
30,924.57 before closing the day up 0.77% at 30,808.35, a
seventh straight winning session.
    The broader Topix  .TOPX , which had reached the post-bubble
milestone on Tuesday, extended its climb to as high as 2,171.37,
before ending with a more modest 0.18% gain to 2,161.69. 
    Japan's stock rally has been powered by an overall very
strong earnings season, a weaker yen underpinned by views that
the Bank of Japan will keep stimulus for longer and an economy
that is starting to show signs of a post-COVID consumption
revival.
    Foreign buying thanks to increased investment by Warren
Buffett and a push for better corporate governance by the Tokyo
Stock Exchange have provided additional impetus.
    The Nikkei's final push to a 33-year peak drew momentum from
rising optimism that U.S. lawmakers can reach a debt ceiling
deal and avert a catastrophic default.
    "Long-term fundamentals might have begun changing in Japan,
and foreign investors do not want to miss this opportunity,"
said Masayuki Kichikawa, chief macro strategist at Sumitomo
Mitsui DS Asset Management.
    "As long as any U.S. slowdown is mild, the current level of
Japanese equities in not overvalued. There is still room for a
further rise."
    Among the Tokyo Stock Exchange's 33 industry sectors,
precision machinery  .IPRCS.T  led with a 1.43% rise, followed
by services  .ISVCS.T , up 1.35%, and machinery  .IMCHN.T ,
which rose 1.08%.
    Uniqlo store operator Fast Retailing  9983.T  was the
biggest gainer by index points on the Nikkei, contributing 74
points with a 2.19% rally. 
    Office equipment company Ricoh  7752.T  was the biggest
percentage gainer, jumping 7.69% on news it was considering
joining forces with a Toshiba unit to develop and manufacture
copiers and printers. 
    The prospective deal is another example of how corporate
reforms - including business portfolio restructuring - are
taking hold in Japan, justifying the rally, said Jamie Halse,
who manages an A$500 million ($340 million) Japan-focused fund
at Platinum Asset Management  PTM.AX  in Sydney.
    "We're seeing foreigners return to buying in Japan, and we
haven't seen that kind of buying since 2013," at the start of
co-called Abenomics, he said.
    "It's very early innings in the reform process," Halse
added. "It's still cheap."
    Despite that optimism, the market is flashing some warning
signs.
    Chip stocks started the day strongly following a rally for
U.S. peers, but then erased those gains or even turned sharply
lower. Advantest  6857.T  surged 3.35% initially, but ended the
day as the Nikkei's worst performer, sliding 2.86%.
    Financial shares  .IBNKS.T  fell the most among the TSE's 33
industry groups, retreating 1.56% after hitting a two-month peak
on Thursday.
    "Investors are going to spend today thinking hard about
whether this Nikkei rally will continue," said Kazuo Kamitami, a
strategist at Nomura Securities. 
    "The word 'overheated' is going to be very much front of
mind."

 (Reporting by Kevin Buckland; Editing by Shri Navaratnam)
 ((Kevin.Buckland@thomsonreuters.com;))