Investors are opting for low- and medium-priced shares on the Tokyo Stock Exchange, reflecting a major shift in investors’ preferences.

As a result, gainers have often outnumbered declining issues in recent days while the benchmark Nikkei average and Topix index registered little change.

There is talk that investors are switching away from information and technology issues and others with high growth potential — investors’ favorites last year — to issues long neglected during the recent rallies.

More precisely, the shift can be taken to indicate that the market is earnestly beginning to count on favorable economic and corporate earnings prospects.

There are two standard yardsticks to gauge a stock’s value — earnings per share and price-to-earnings ratio.

Speculative investors tend to give more weight to PERs.

Indeed, in 1999 and up to last February, investors were lopsidedly in favor of information and technology shares that looked to offer great long-term growth potential.

Thanks to the growing wave of buying, some IT shares sold at staggering averages of more than 100 times earnings.

Then came news of the tumble of the tech-heavy Nasdaq index on Wall Street.

IT shares and other high-prices issues came under severe selling pressure in Tokyo, frightening investors away.

When the dust settled, investors began switching to shares supported by favorable earnings prospects and those at attractive price levels compared with their earnings projections for the current and coming business years. Their new picks are not necessarily confined to the low-valued sector of the market.

Take Sumitomo Chemical Co. for example. Its stock now sells at around 600 yen, or roughly 21 times its estimated earnings. The firm’s earnings per share for the next fiscal year are forecast at 29 yen on a consolidated basis.

Judging from further increases in earnings the company expects to log in the next two business years, there appears a good chance that Sumitomo Chemical shares will rise further to catch up with the price of the average Tokyo stock, which is now projected at 32 times earnings for the coming fiscal year.