Nikkei hits 5-wk high on Olympics euphoria; strong GDP supports

 

The euphoria of Tokyo winning the 2020 Olympics drove Japan's Nikkei share average to a five-week high on Monday, led by stocks expected to benefit from the event, with a sharp upward revision to second-quarter growth further boosting sentiment.

 

Taisei Corp, the contractor for the stadium built for the 1964 Olympics, jumped as much as 17.4% to a 6-1/2 year high on expectations it will be involved in reconstructing the facility for the 2020 Games.

 

The Nikkei was up 2.7% at 14,238.42 in mid-morning trade after earlier rising to 14,251.46, its highest since August 6.

 

The market jumped past resistance at 14,174.71, the 50% retracement of the slide from a May peak to a June low.

 

"The market is excited today, and it will last throughout the day," said Nobuhiko Kuramochi, a strategist at Mizuho Securities, adding that all types of investors were buyers.

 

Real estate and construction were the best-performing sectors with respective gains of 5.1% and 4.6%. Mitsubishi Estate Co soared 4.7% and Mitsui Fudosan Co  gained 5.7%.

 

OLYMPICS RALLY

 

Shares of other contractors also outperformed, with Kajima Corp , Obayashi Corp ,  Shimizu Corp  and Tobishima Corp  up between 7.9 and 11.9%.

 

Sportswear maker Mizuno Corp njumped 16%, while sneaker maker Asics Corp  surged 8.2%.

 

The economic impact of the Olympics win was estimated by the Tokyo bid committee at more than 3 trillion yen with the creation of 150,000 jobs.

 

The broader Topix index added 2.2% to 1,172.73 in relatively active trade, with volume already at 43% of its daily average for the past 90 days.

 

But some analysts cautioned the celebratory mood could spark irrational expectations about benefits from the Olympic Games.

 

"The Olympics euphoria should be short-lived. Such indiscriminate buying will end shortly," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

 

"Everyone is buying everything now, but the market will soon become rational and take a close look at which companies will actually benefit from the Olympics."

 

GDP BOOST

 

Monday's strong GDP revisions served as a tailwind for the stock market. Annualised growth in the second quarter was revised up to 3.8% from a preliminary 2.6%, heightening the case for Prime Minister Shinzo Abe to proceed with a planned sales tax hike next year.

 

"Foreign investors won't buy into Japanese equities further because the government will proceed with a planned sales tax hike, but will sell if it scraps the plan. So in that sense, the outcome was positive," said Shun Maruyama, chief Japan equity strategist at BNP Paribas.

 

He expected the Nikkei would likely rise to 15,000 - a level not seen since May - in early October when the decision on whether to raise the tax as planned will be announced.