Nikkei marks fresh 34-year peak as shippers, banks gain

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Japan’s Nikkei share average rose to a 34-year peak on Monday, with the latest leg higher powered by gains for shippers and financials.

The Nikkei entered the midday recess up 0.83 per cent at 35,870.73 after touching the highest since February 1990 at 35,875.94.

Value shares outperformed after lagging growth stocks last week when the Nikkei booked its best performance in 22 months.

The broader Topix, which is less weighted toward tech shares than the Nikkei, rose 1.03 per cent as of the break and also touched a new 34-year high during the session.

The Topix value share subindex climbed 1.41 per cent, outpacing the 0.65 per cent rise for the growth share subindex.

The Tokyo Stock Exchange’s (TSE) shippers’ index jumped 5.66 per cent to lead gains among the 33 industry groups, with geopolitical risks pushing up shipping rates.

Shares of financials, which had retreated sharply on Friday, rebounded strongly. The TSE’s index of securities firms rallied 4.34 per cent, while banking advanced 2.15 per cent.

The continued gains for Japanese stocks come despite signals from some technical indicators of overheating. One closely watched gauge called the relative strength index, or RSI, climbed above 76 for the Nikkei, with readings over 70 indicating an overbought market.

“The Nikkei is displaying surprising strength”, and some form of adjustment in the speed of the rally is likely this week, said Kazuo Kamitani, a strategist at Nomura Securities.

He pointed to a decline in US bond yields and a stabilisation in the yen exchange rate for buoying overall sentiment.

Providing another tailwind, after the close of Monday’s trading, the TSE will begin publishing a monthly list of companies that have disclosed plans to boost shareholder value.

The TSE’s corporate governance initiatives are “generating a lot of excitement,” said Daniel Hurley, portfolio specialist of emerging market and Japan equities at T. Rowe Price.

“It’s why foreign investors, activist investors, hedge funds and Warren Buffett and Berkshire Hathaway are paying close attention to Japan today.”