Key Highlights :
Tokyo's Nikkei share gauge edged lower on Thursday after a steep selloff in the previous session, as tech shares pared recent gains and energy-related stocks climbed on higher oil prices. The Nikkei bounced between gains and losses, trading 0.13% lower at 31,871.23 as of the midday break. The broader Topix slipped 0.05% to 2,205.27. Drugmaker Eisai surged 9.14%, leading gains on the Nikkei, after US regulators gave a positive reading of a late-stage trial of its Alzheimer’s disease treatment. Sony Group declined 0.99%, while utility Tokyo Electric Power Co jumped 5.41%.
The Nikkei plunged the most in three months on Wednesday, trimming a blistering 15% surge over the past three months that has outpaced global peers. “The market has not completely broken out of its overheated state,” said Nomura strategist Miki Sawada. “Growth stocks and semiconductor-related stocks, which had been rising recently are being sold off.” US equities fell overnight as investors awaited key inflation data as well as the Federal Reserve’s policy meeting next week, where the central bank is expected to hold off on raising interest rates.
Japan’s economy grew more than initially thought in January-March, revised data showed, fueled by a post-pandemic pickup in corporate and consumer spending. Of the Nikkei components, 133 stocks rose and 90 fell, while two were flat. The precision machinery sector lost 2.01% to become the worst performer among the Tokyo Stock Exchange’s 33 industry sub-indexes. Electric and gas utilities were the biggest gainers, adding 2.44%. In the broader market, internet retailer Syuppin jumped 5.1%, after reporting a more than 16% sales growth in May.
Thursday's selloff was driven by profit-taking in the tech sector, which has seen a surge in the past few months due to strong demand for semiconductors and other components. Shares of tech giant SoftBank Group Corp dropped 0.98%, while chipmaker Tokyo Electron Ltd and mobile phone maker Sharp Corp both declined 1.21%.
The selloff in Tokyo comes after a sharp rally over the past three months, which has seen the Nikkei surge more than 15%. Analysts have warned that the rally may be overheated, as investors pour money into stocks on the back of a strong economic recovery in Japan and the US.
Overall, Thursday's trading in Tokyo reflects a more cautious approach from investors, who are wary of the potential for a sharp correction in the market. With the Federal Reserve's policy meeting next week, investors are likely to remain cautious, as any indication of a tightening of monetary policy could lead to a selloff in the market.