Japan's Nikkei index jumped to a near 26-year-high on Tuesday morning, as foreign investors piled in on expectations of strong earnings from Japan Inc., while Wall Street's strength underpinned sentiment.
The Nikkei share average opened lower but later gained as much as 1.0 per cent to 22,775.68 in morning trade, the highest level since January 1992.
US stocks climbed to record highs overnight, helped by earnings optimism and merger activity. “US stocks are supported by strong fundamentals, which are also lifting foreign investors’ risk appetite,” said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “Foreign investors who were underweight on Japanese stocks in the summer are raising their investment stances to neutral and even overweight for a few reasons.”
He said that foreign investors are attracted to Japanese companies’ strong earnings prospects, as well as Japan's political stability, which he describes as rare at present among developed economies.
Japan's Shinzo Abe was re-elected prime minister last week after his Liberal Democratic Party-led coalition retained its two-thirds “super majority” in the parliament's lower house.
According to Japan Exchange Group, foreign investors have bought a total of about 4.4 trillion yen ($39 billion) in Japanese stocks and futures over the past six weeks.
Traders said factory automation equipment makers such as Fanuc Corp and Keyence Corp have been snapped up on expectations of strong earnings, soaring 2.1 per cent and 2.9 per cent, respectively. Inpex Corp jumped 3.6 per cent and Japan Petroleum Exploration Co soared 3.9 per cent after oil prices hit the highest since early July 2015 on Monday, before edging down during Asian trade on Tuesday.
Realtor Mitsubishi Estate Co jumped 4 per cent after the company raised its net profit outlook to 112 billion yen from 108 billion yen for the fiscal year ending March 2018, thanks to strong building management business and other operations. It lifted other realtor stocks, with Mitsui Fudosan gaining 1.2 per cent.
Listed brokerage firms also gained, with Nomura Holdings surging 2.7 per cent and Daiwa Securities advancing 1.5 per cent.
The broader Topix rose 0.6 per cent to 1,802.85.