Nikkei 225 In Tokyo Closed at New Record High, Policy Uncertainties Keep China Stocks Down

Arjun Pandit
04 Mar, 2024
Mumbai

In Asia, bench market indexes in Japan advanced on the speculation that the government is ready to declare the end of deflation, Chinese lawmakers gathered for their annual legislative meeting, and India's market looked higher. 

The benchmark Nikkei index crossed 40,000 for the first time in the hopes of more support from the government and enthusiasm about the artificial intelligence boom lifting the sale of semiconductor chip-making equipment. 

The Nikkei 225 average gained 0.5% to 40,099.09, and the TOPIX edged slightly lower by 0.07% to 2,707.47.

Tokyo Electron, Disco Corp., Screen Holdings, and Softbank gained between 1.3% and 3%. 

The current market rally in benchmark indexes in Japan is largely driven by the hopes of sustained corporate governance reforms, a 34-year low yen, and the Nippon Individual Savings Account for individual investors. 

Global funds' allocation to Japanese equities is still lower than benchmark weights, suggesting there is room for increasing allocation to Japan if corporate results continue to outperform expectations. 

The Nikkei Stock Average has gained 19% in the year so far, following a 28% rally in 2023, and surpassed the previous high set in December 1989. 

Japanese stocks are still viewed as reasonably priced, with a price-to-earnings ratio just above 17 and significantly lower than 60 at the height of the market bubble 34 years ago.

The weakening yen has also supported earnings growth at Japanese companies, but the rapid decline in the yen could become a negative factor for foreign investors, the main drivers of the current market rally. 

 

China's Policy Uncertainties Keep Indexes Down

Market indexes in China drifted lower after trading mixed in the previous week as investors looked ahead to the release of economic targets for the current year and policies to revive property markets and stabilize financial markets. 

Chinese lawmakers gather in Beijing this week for their annual legislative meetings, widely known as "Two Sessions" or "lianghui." 

Lawmakers are likely to finalize the annual economic growth target, announce high-level personnel appointments, and ramp up national security rhetoric involving China's commitment to taking control of Taiwan. 

Investors are also awaiting clarity on the government stimulus plans to revive the faltering economic rebound and step up market intervention to arrest falling market indexes. 

Policymakers are expected to announce an annual economic growth target rate of at least 5% and a budget deficit of around 3% of gross domestic product. 

The Chinese government's economic growth targets are perceived with deep skepticism, reflecting a widespread practice of managing figures to satisfy the leadership's objectives. 

The CSI 300 index added 0.2% to 3,544.10, and the Hang Seng index declined 0.2% to 16,552.81. 

Tech stocks were among the leading decliners in Monday's trading, and Tencent, Alibaba Group, and Trip.com declined between 1% and 3%. 

EV makers were on the slide amid growing price competition in China's crowded EV market. 

Li Auto fell 5%, BYD declined 1.5%, and Geely Automotive fell 1.2%. 

 

India Indexes Traded Around Record Highs 

Stocks in Mumbai opened higher in Monday's trading as investors digested the economic updates of last week and reassessed the economic growth and interest rate outlook. 

The Sensex and the Nifty indexes edged higher by 0.1% and extended the previous week's gains, and investors focused on large-cap stocks in power, retail, consumer products, and financial services companies. 

The faster-than-expected increase in economic growth of 8.4% in the December quarter overshadowed the muted increase in core industrial production in January. 

Market sentiment remained positive despite the net investment outflow by foreign investors in January, as investors estimated higher economic growth would support growth in corporate earnings in the March quarter. 

The Sensex index increased 0.1% to 73,875.02, and the Nifty index rose 0.2% to 22,413.0.

On the Mumbai stock exchange, 229 stocks traded at their 52-week highs and 18 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds increased to 7.06%, and the Indian rupee strengthened to ₹82.87 against the U.S. dollar.