Japanese stocks rose, with the Nikkei 225 Stock Average trading at the highest in nearly 33 years, as optimism the US will avoid default added to bullish sentiment that has fueled one of the world’s best rallies of 2023.
(Bloomberg) — Japanese stocks rose, with the Nikkei 225 Stock Average trading at the highest in nearly 33 years, as optimism the US will avoid default added to bullish sentiment that has fueled one of the world’s best rallies of 2023.
The Nikkei 225 advanced as much as 1.2% to 30,924.57, putting the blue-chip gauge at the highest intraday level since August 1990. The Topix, which maintained a 33-year high set earlier this week, gained as much as 0.6%, as service-sector firms and machinery makers provided the biggest boosts.
Both gauges are set to complete their sixth-straight week of gains as strategists at Goldman Sachs Group Inc. to Macquarie Group Ltd. say the case for a bull run is solid thanks to corporate governance reforms boosting valuations and loose monetary policy adding to tailwinds. Morgan Stanley forecast the Topix could eventually climb an additional 8% to reach 2,350, propelled by themes on return-on-equity improvement and a favorable yen.
“We believe that there are a lot of legs to this rally,” Belita Ong, chairman at Dalton Investments LLC, said on Bloomberg TV. “The reality is that the Japanese market has been cheap for a very long time and for good reason, because managements were not willing to share their profits with investors.”
The latest leg of the rally gained momentum on Friday as the yen touched its lowest this year, lifting shares of exporters and increasing the purchasing power of dollar-based investors looking to buy Japanese stocks. Exchange data released Thursday showed foreign investors were net buyers of Japanese equity for a sixth-straight week, purchasing a net ¥781 billion ($5.6 billion) worth of shares and futures in the week ended May 12.
The Topix is now on track for the longest weekly winning streak since November 2017. Still, the index remains nearly 25% away from its 1989 peak.
Read: Volatility Jumps as Investors Caught Off Guard by Nikkei Rally
Investors in Tokyo also breathed a sigh of relief on signals that American lawmakers are making progress on debt-ceiling talks and will be able to avert a first-ever default. The S&P 500 hit a nine-month high on Thursday, while the Nasdaq 100 rallied almost 2% to the highest since April 2022.
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