TOKYO: Brisk earnings at Japanese companies, US elections and a high efficacy claim for a coronavirus vaccine in the final phase of development have sent Japanese stocks into an upward spiral, allowing the benchmark Nikkei average to rise back to levels seen nearly three decades ago, brokers and analysts said.

Although few market people forecast a sell-off, many analysts suggested the possibility of the market’s slowdown.

On Wednesday, the Nikkei average of 225 selected issues listed on the first section of the Tokyo Stock Exchange gained 444.01 points, or 1.78 pct, in its seven-session winning streak to close at 25,349.60, the first closing above 25,000 since Nov. 1, 1991 and the best finish since June 4 the same year.

After peaking at 38,915,87 on Dec. 29, 1989, the Nikkei started its slide in line with the collapse of Japan’s bubble economy. The leading equity price gauge hit 7,054.98 on March 10, 2009.

The Nikkei recouped some 7.4 pct of its post-bubble loss in just seven market days until Wednesday, by gaining nearly 2,400 points.

“The rise seems too fast,” an asset manager said. “The Nikkei wasn’t expected to rise to around 25,300 much earlier than the end of December.”

The market’s biggest focus had been the Nov. 3 US Election Day.

Ahead of the presidential and congressional elections, investors bought stocks in anticipation of victories of Democratic presidential candidate Joe Biden and the Democrats and resulting implementation of massive fresh coronavirus relief measures.

Despite the prolonged ballot counting and incumbent President Donald Trump’s intention to take the election fight to the Supreme Court, buying sentiment remained strong.

“Investors’ concerns over post-election political turmoil receded after Biden declared his victory on Saturday,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co.

Even media forecasts that the Republicans will be able to barely keep their Senate majority gave a buying cue to market participants because the news eased concerns over a US sales tax hike, brokers said.

Also behind the Nikkei’s upsurge was announcements of robust July-September earnings and rosier full-year profit projections by a number of Japanese companies, particularly manufacturers.

Denying irrational exuberance, Maki Sawada, vice president of Nomura Securities Co.’s Investment Research & Investor Services Department, said upward revisions to earnings estimates “boosted momentum” for buying stocks backed by vigorous business performance.

“The market’s sharp ascent was also brought on by heightened hopes that an effective novel coronavirus vaccine will shortly become available to the public,” Sumitomo Mitsui’s Ichikawa said, referring to U.S. drug maker Pfizer’s report that a vaccine it is developing with German partner BioNTech has produced an over 90 pct efficacy rate so far in the phase 3 clinical trial.

But looking ahead, many analysts noted that optimism cannot be warranted.

“The resurgence of the coronavirus would pose a downside risk to stocks,” Ichikawa warned.

Echoing him, Sawada said that the Nikkei may fall below 24,000 if the United States, which is facing another round of pandemic, implements fresh lockdowns.

Yutaka Miura, senior technical analyst at Mizuho Securities Co., said the key index would go south if Biden’s administration disappoints investors by, among others, moving to raise taxes, or if the Pfizer-BioNTech vaccine is eventually found not as effective as claimed.

But if the vaccine proves highly effective, the Nikkei may climb to around 26,000, he added.

JIJI Press