Nikkei Edges Back from Near Record High as Tech Stocks Weigh (Update 1)

Reuters

12:22 JST, February 19, 2024 (updated at 16:00 JST)

TOKYO (Reuters) – Japan’s Nikkei share average eased back from near a record high on Monday, pressured by chip-related shares in the wake of losses for U.S. peers on Friday.

Nintendo also tumbled following media reports that the successor to its switch game console won’t be released until early 2025, instead of later this year.

The benchmark Nikkei ticked down 0.04% to finish the day at 38,470.38, after pushing as high as 38,865.06 on Friday. That was just 93 points from the all-time high reached on the final trading day of 1989, at the peak of Japan’s bubble economy.

“The Nikkei will break the record, probably in the near future,” said Kenji Abe, a strategist at Daiwa Securities who forecasts the index will reach 43,000 by March of next year.

“I don’t know whether it can be this week or next week, but it’s just a matter of time.”

The outsized drag from tech shares on the Nikkei was borne out in the much better performance of the broader Topix index , which gained 0.57%. A Topix index of growth shares slipped 0.14% while a value share index TOPXV rallied 1.26%.

Trading was also likely thinned by the President’s Day holiday in the U.S.

The Nikkei has climbed a blistering 15% this year already, and technical indicators are flashing warnings of overheating.

Its relative strength index (RSI) sits around 76.4 currently, and has been above the 70 threshold that signals an overbought market for a week.

“Until there’s some new catalyst it seems like it would be difficult to chase prices back up to the record high,” said Maki Sawada, a strategist at Nomura Securities.

She also pointed to the drag from higher U.S. bond yields US10YT=RR, particularly on tech stocks, as offsetting support from a weak yen.

Chip-sector heavyweights Advantest and Tokyo Electron were the Nikkei’s biggest drags, shaving off 60 and 55 index points respectively with declines of 3.2% and 1.6%.

Nintendo was the biggest percentage decliner though, slumping 5.8%.

Bucking the trend was artificial intelligence-focused startup investor SoftBank Group, adding a Nikkei-leading 47 index points with a 2.8% rise following a media report that founder Masayoshi Son is looking to raise up to $100 billion for a chip venture.

Shares in banks and other financial companies outperformed, with higher bond yields boosting their profitability. Banking was the best performer among the Tokyo Stock Exchange’s 33 industry groups, jumping 2.9%.