Key Japanese Share Indexes Ride Rally to 22-Month Highs

Japan’s stock rally is gaining steam, lifting key share indexes to 22-month highs Wednesday as both foreign and domestic investors continue to pour in.

And what they’re buying most aggressively are two sectors: the biggest stocks, and the biggest of the smaller stocks.

That shows in index price trends:

* The Topix Core-30 index, which tracks Japan’s largest stocks (including Honda Motor, Sony Corp. and Matsushita Electric) has risen 10.1% over the last month and is up 43.3% year-to-date, in yen terms.

That beats the performance of the broader blue-chip Nikkei-225 share index, which at 18,357.86 on Wednesday is up 6.2% over the last month and 32.6% year-to-date.

* Smaller stocks--those traded in Japan’s over-the-counter market--have racked up gains far exceeding the blue chips’ returns.

The Jasdaq OTC index has rocketed 30.6% over the last month alone, and is up a stunning 121.8% year-to-date.

But the biggest of the OTC stocks have done even better than the smaller names.

The Jasdaq-Bloomberg Top-50 index, which includes such names as Amway Japan, Doutor Coffee and Yahoo Japan, has risen 32.5% over the last month and 164% year-to-date.

A hunger for big technology stocks is fueling Japanese blue chips’ latest advance--just as U.S. investors are flocking once again to tech leaders such as Intel and Apple Computer.

On Wednesday, Matsushita Electric, the world’s biggest maker of consumer electronics, soared 16%--the biggest one-day rise since Aug. 22, 1986. The company’s U.S.-traded shares tracked the gain in Tokyo, rocketing $31.69 to $232 on the New York Stock Exchange.

Matsushita was named one of the top 40 “best idea” global stocks by brokerage Morgan Stanley Dean Witter, which cited the firm’s new Digital Versatile Disc technology and its cost-cutting measures.

Matsushita in May agreed to cooperate with Nintendo Co., the world’s No. 2 home video game maker, to develop products using DVD technology.

“Investors are looking for any reason to justify buying electronics stocks, some of which are very highly valued,” said Norio Suzuki, investment manager at Indocam Japan Ltd.

Also on Wednesday, Advantest Corp., the world’s No. 1 maker of equipment to test computer memory chips, climbed 5% after Nikko Salomon Smith Barney analyst Hiroshi Yoshihara raised his rating on the stock from “neutral” to “outperform” on expectations of better earnings.

And shares in Yahoo Japan, Japan’s most-visited Internet directory, jumped 4% after the firm said first-quarter pretax profit rose almost sevenfold from the previous year as it extended its domination of the country’s growing market for online advertising.

Meanwhile, the rally in Japan’s smaller stocks--which had been beaten down last year to their lowest levels in a decade or more--reflects growing optimism about domestic spending and the domestic economy in general.

The government on Wednesday said the number of Japanese corporate bankruptcies plummeted 26.1% in June from a year earlier.

The drop in the number of failed companies follows a recent announcement by the government that the economy grew a robust 1.9% in the first three months of this year.

Japanese economic officials have also been saying that the economy, now in its longest downturn since the end of World War II, had hit bottom and could be gearing up for recovery.

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Japan’s Giants

How U.S.-traded shares of major Japanese companies fared on Wednesday.

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Stock Wed. close and change Canon* $32.00 +$0.63 Fuji Photo* 38.63 +1.50 Honda Motor 88.13 +1.13 Kyocera 67.00 +3.63 Matsushita Elec. 232.00 +31.69 Nippon Tel. 63.44 +0.81 Sony 120.63 +2.56 TDK 108.75 +8.13 Toyota* 67.00 +2.25

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*Trades on Nasdaq; all others trade on New York Stock Exchange.

Source: Reuters