Japanese stocks soared to hit a 15-year high on Monday, with financial and real estate companies leading the gains, as investors bet on steady improvement in the Japanese economy and increased shareholder returns.
“The market has been experiencing the best earnings estimate revisions of all the major markets. And I expect robust earnings growth to continue for the next 18-24 months,” said Tristan Hanson, head of asset allocation at Ashburton Investments in London.
The Nikkei share average rose 0.3 per cent to 19,309.23, hitting a 15-year intra-day high at one point and extending its gain so far in 2015 to almost 11 per cent, outpacing many other equity markets.
“Rises in bank and other domestic demand-oriented shares symbolises an improved confidence that the economy is getting out of deflation,” said Takashi Hiroki, chief strategist at Monex Securities.
Japan’s domestic demand-oriented shares, such as banks and real estate companies shone on Monday, as the country is seen as one of the biggest beneficiaries of weak oil prices, with the country’s net oil imports at 4.2 per cent – the highest ratio among major developed countries.
Shares of banks edged higher by 1.6 per cent, the top performer among the Tokyo Stock Exchange’s 33 industry sub-index. Mitsubishi UFJ Financial Group shares rose 2.0 per cent and stocks of Sumitomo Mitsui Financial Group climbed 2.3 per cent.
Real estate company shares broke above their November peak to hit the highest level since January 2014.
Mitsubishi Estate gained 1.4 per cent while Mitsui Fudosan rose 1.2 per cent.
Investors are also becoming more optimistic on higher shareholder returns after industrial robot maker Fanuc, long known for its limited engagement with shareholders, said last week it is considering dividend hikes and more dialogues with investors.
Fanuc added 0.6 per cent to hit a fresh record high, after its massive 13.2 per cent gain on Friday.
The improved mood has also been underpinned by expectations that Japanese public investors, such as the US $ 1.1-trillion Government Pension Investment Fund and Japan Post, will keep increasing stock investment under the auspices of Japanese Prime Minister Shinzo Abe.
Japanese officials said on Saturday that the government plans to name the currency head of the GPIF, Takahiro Mitani, to another term as the fund’s chairman.
The broader Topix rose 0.2 per cent while the JPX-Nikkei Index 400 also advanced 0.2 per cent.
Investors took profits in other recent gainers such as drugmakers, with pharmaceutical companies down 0.9.