Favorable corporate earnings and economic prospects have not yet been factored into share prices, and price moves on the chart show that the Tokyo stock market has overcorrected itself.

On Monday, the 225-issue Nikkei average slipped below the 11,000 level, or 8.3 percent below its 25-day moving average, marking a deviation far larger than the 7.7 percent shortfall registered on Feb. 6, when the key index closed at 9,420.85 — its lowest since Dec. 14, 1983.

On the New York Stock Exchange, the technology-heavy Nasdaq composite index fell below 1,500 last week, hitting an eight-month low.

The recent flurry of activity on the Tokyo market could presage a more stable market in the near term. Buyers will move in once it becomes evident that listed companies are revising their already positive earnings projections upward.

Daiwa Institute of Research Ltd. has forecast that listed companies as a whole will wind up fiscal 2003 with a 19 percent year-on-year increase in pretax profits, after posting a 57 percent gain in the current fiscal year.

Based on the current level of stock prices, the projected improvement in earnings will bring the average price of Tokyo stocks to 24.5 times earnings in the current business year, and to 22.8 times in fiscal 2003, which will mark the lowest price-to-earnings ratio since fiscal 1985.

The latest earnings projections for the current business year already outshine the recovery forecast in March. Listed companies as a whole are now expecting a year-on-year profit increase of close to 20 percent for fiscal 2003.

The Tokyo market now appears poised to stage a strong rebound and lift the key market gauge back above its recent high.

With a good number of companies racing to their best year ever, investors will find many reasonably priced stocks.

The Japanese economy is now unmistakably at the initial stage of a cyclical recovery. And companies that have pressed forward with sweeping restructuring programs are poised to benefit from their cost-cutting efforts.

Long-neglected stocks will soon begin attracting attention on the market.

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