Small-capitalization stocks, especially those traded on the over-the-counter market, are drawing strong buying interest.
The Nikkei OTC average has risen some 27 percent in active trading from its Jan. 11 low.
Since the U.S. Federal Reserve eased its grip on credit at the start of this year, investors have opted for long-battered issues around the world.
Major Japanese stocks stayed in the doldrums, however, amid concerns about the worsening supply and demand situation ahead of March 31 book-closings. Small caps thus have emerged as substitutes.
As a barometer of interest in small caps, newly listed stocks on the OTC market, which more often than not fell below their initial quotations in November and December, have risen more than 70 percent from their first listing prices on average.
Chart reading shows that the Nikkei OTC average will offer an important clue at 1,672, where it regains one-third of the losses it suffered during its fall from a high last February to a low in January. Investment at this level of the average is reasonable as price-earnings ratios for fiscal 2001 come to 24 to 25 there.
Small caps tend to attract buying interest when expectations of an economic recovery are strong. If investors find it difficult to follow the wisdom, they should focus on issues with low PERs.