Japan’s Topix Stock Index Hits 3-Year High

Japan’s broad Topix stock index closed at its highest level in three years Thursday, helped by a continuing inflow of cash from foreign investors.

Telecom stocks were among the leaders, but shares of real estate developers and other, more staid companies also rose. Positive economic reports have raised optimism about the nation’s recovery.

“Where this market goes depends on the information technology sector, because that’s where the growth is,” said Ichizo Yamauchi, director of research at Kokusai Asset Management Co.

Yamauchi said his company is buying telecom and other technology stocks--but not “domestic demand-related” shares.

The Topix index of all 1,357 issues on the Tokyo Stock Exchange’s first section rose 30.52 points, or 1.9%, to 1,622.05, its highest close since Oct. 1, 1996. The index is up 49% this year.

The narrower Nikkei 225-stock average rose 257.99 points, or 1.4%, to 18,532.81, its highest close since Sept. 10, 1997.

Stocks got a boost before the close of trading after Goldman Sachs Japan Ltd. bought $379 million of Japanese stocks for foreign institutions in various sectors, including drugs and auto makers, traders said.

In the telecom group, leaders included NTT Mobile Communications Network and Nippon Telegraph & Telephone Corp., the world’s largest phone company, each rising about 3%. Nippon’s U.S.-traded shares gained $1 to close at $85.38.

“Telecommunications are one of the very few decent stories in Japan,” said Fiachra Aodh MacCana, head of research at WestLB Securities Pacific Ltd. “They’re not expensive relative to telecommunications stocks in Europe or the U.S.”

But investors took a broader view, returning to the industries they recently have ignored. Mitsubishi Estate, Japan’s No. 2 real estate company, soared 18%, for example.

But not everyone is convinced that signs of improvement in Japan’s outlook are a reason to buy domestic demand-related stocks.

“Many of these companies are not restructuring fast enough and have a very poor earnings outlook,” said Kokusai Investment’s Yamauchi. “People are only shifting some of their portfolios into the cheaper stocks today. I doubt it will continue.”

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Broad Rally

Japan’s Tokyo stock price index, or Topix, which contains 1,357 issues, rose to its highest level Thursday since October 1996. Quarterly closes and latest:

Thursday: 1,622.05