Tokyo stocks fell back Monday due to investor concerns over an overheating market after the recent run-up.
The 225-issue Nikkei average of the Tokyo Stock Exchange snapped a four-session winning streak and sank 211.09 points, or 0.79%, to close at 26,433.62, after climbing 107.40 points Friday.
The Topix index of all TSE first section issues ended 31.60 points, or 1.77%, lower at 1,754.92, following an 8.27-point rise the previous trading day. The drop ended the broader index’s six-session advance.
Despite opening up thanks to rises in all three major U.S. stock indexes including the Dow Jones Industrial Average on Friday, the Tokyo market capitulated to profit-taking in the morning.
Drops in Dow futures in off-hours trading and the firming of the yen against the dollar further pushed down stocks in the afternoon.
The downtick reflected investors’ wariness that the market is overinflated as a result of the bull run from the start of this month, brokers said.
“The sense of market overheating is accounting for the bulk of market-moving incentives today,” Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co., said. “With the Nikkei reaching as high as 26,800 (in the morning), investors are taking cues from (off-hours) falls in U.S. stocks.”
In comparison, the surge in domestic and foreign coronavirus infection cases was not playing as large a role in dampening market sentiment as it has been continuing for several weeks, he said.
“Market players do not seem to be significantly fazed by the resurgence of coronavirus cases and potential restrictions on economic activity,” Kazuo Kamitani, senior associate at Nomura Securities Co.’s Investment Research & Investor Services Department, said, suggesting that they are instead looking ahead to a post-coronavirus economy.
Despite the resurgence, hopes for coronavirus vaccine development and expectations for large-scale fiscal spending around the world to prop up economies in the event of restrictions on economic activity are brightening the market mood, brokers said.
Falling stocks outnumbered rising ones 1,810 to 335 in the TSE’s first section, with 32 issues unchanged. Volume jumped to 2.487 billion shares from Friday’s 1.529 billion shares.
Sectors that are sensitive to the coronavirus epidemic such as real estate and transport succumbed to selling pressure, with Mitsui Fudosan and JR Tokai falling 5.23% and 4.90%, respectively.
Automakers including Honda and Nissan sank due to the yen’s appreciation.
Other major losers included pharmaceutical firms Astellas and Daiichi Sankyo.
On the other hand, information technology names that are expected to do well even during the coronavirus resurgence, such as medical information provider M3 and internet advertising firm CyberAgent, attracted buying.
Major Nikkei components Fast Retailing, SoftBank Group and Tokyo Electron also gained.
In index futures trading on the Osaka Exchange, the key December contract on the Nikkei average slid 170 points to 26,460.
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