For the first time ever, the Nikkei 225 index of Japanese stocks exceeded the psychological level of 40,000 points, in a move that will open the door to further gains in the index’s historical upward trajectory.
The index, which includes leading stocks of major Japanese companies, rose by about 1 percent to 40,301.30 at the beginning of trading on Monday, achieving a new record level.
Technology stocks, which were the main driver of the rise in stocks over the past year, topped the list of best performers today, including Advantest Corp.
The broader Topix index also rose, but is still about 6 percent below the record it achieved more than three decades ago, before Japan’s asset price bubble burst.
Both the Nikkei and Topix indices derive support from consumption data in the United States, which has strengthened expectations that the US Federal Reserve will cut interest rates as early as next June, which is a positive signal for investors around the world.
For his part, Charu Chanana, a strategist at Saxo Capital Markets based in Singapore, said: “The Nikkei reaching 40,000 is definitely a key psychological level, which could offer some resistance to the index and bring volatility to the index,” adding, according to Bloomberg, “But “When structural factors remain in favor of stocks, and the yen continues to weaken, this is more likely to be a bullish signal than to fuel any concerns about overbought territory for Japanese stocks.”
The Nikkei index regained its historic peak reached in 1989 last month as investors from around the world flocked to Japan’s largest companies due to improving shareholder returns, a weak yen and booming corporate profits.
Warren Buffett’s endorsement of Japanese stocks last year boosted confidence in the Tokyo Stock Exchange, and concerns about a slowdown in China prompted many funds to turn to Japan.
Movements in the Nikkei index were weak after it reached this important level on February 22, as investors took profits and some analysts expressed surprise at the speed of the rise. However, the decline on the Tokyo Stock Exchange remained limited as investors stepped in to buy on dips.
A positive outlook for the future
Foreign investors remain optimistic about Japanese stocks. BlackRock, the world’s largest asset manager, and Amundi Asset Management, Europe’s largest money manager, expect earnings growth and changes in corporate governance to continue strong market performance.
Fears of excessive rise in the Japanese stock market
Although the Nikkei 225 has reached 40,000, there are some concerns about the market going too high.
“While 40,000 is important for the Nikkei 225, the pace is too fast, and this level was reached too early compared to the actual performance of the economy and companies,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.
She continued, saying: The growth of the economy is like a long-distance “marathon” race, and stock markets have moved so quickly that they may soon lose their breath.
2024-03-04 04:40:32
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