Japan’s Nikkei Sheds Early Gains amid Rising JGB Yields (UPDATE 1)

Reuters

12:31 JST, May 29, 2024 (updated at 16:00 JST)

TOKYO (Reuters) – Japan’s Nikkei share average shed early gains to end lower on Wednesday as investors sold growth stocks after the nation’s benchmark 10-year yield hit its highest in more than 12 years.

The Nikkei fell 0.77% to close at 38,556.87, after rising as much as 0.7% to track strong performances of U.S. chip-related stocks, driven by AI darling Nvidia.

The broader Topix ended nearly 1% lower at 2,741.62.

“The market became nervous about rising JGB yields, which is a headwind for heavyweight growth stocks,” Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities said.

“The gains in domestic stocks were eliminated by the rising JGB yields.”

Japan’s 10-year bond yield hit 1.075%, its highest level since December 2011, as traders gauged growing bets that policy tightening by the Bank of Japan is imminent.

Higher yields could hurt growth stocks whose appeal lies in future cash flows.

The Topix’s growth stock index lost 1.1%, while the value shares index fell 0.8%.

Chip-making equipment maker Tokyo Electron shed early gains to end 0.3% lower. Shares of air-conditioning maker Daikin Industries fell 2.3% and Uniqlo-brand owner Fast Retailing lost 1.2%.

Mitsubishi Electric fell 4.5% as the home appliances maker lowered the target for its return-on-equity to 9% from 10%.

Nuclear power plant operator Tokyo Electric Power Holdings fell 8.3% to become the biggest percentage loser on the Nikkei.

The utility sector fell 2.6% to become the worst performer among the Tokyo Stock Exchange’s 33 industry sub-indexes.

Chip-testing equipment maker Advantest rose 0.8% and SoftBank Group gained 2.7%, supported by an overnight 7% gain in shares in Nvidia. An index of U.S. semiconductors rose nearly 2%.

The insurance sector was the top performer, rising 0.8%, with Sompo Holdings jumping 4.2% to become the top percentage gainer on the Nikkei.