Japan stocks mostly soar on US midterms but AI-related ones extend tumble
- The broad Topix rose 1.3% as of 0131 GMT, and was earlier up as much as 2.4%
Japanese stocks rallied due to US midterm election results and lower crude oil prices, but AI and chip shares declined sharply on concerns about data center expansion.
- Impact of US midterm elections on Japanese stock sectors.
- Reasons for the sharp decline in AI and chip shares.
- Sector rotation benefiting retail and real estate.
TOKYO: Japanese stocks rallied on Thursday, buoyed by declines in crude oil after a Democratic sweep in US midterm elections weakened President Donald Trump’s position and raised hopes for an end to the Iran war.
However, AI and chip shares extended sharp declines from Wednesday on bets that Democrats will slow the pace of AI data centre expansion.
The tech selloff benefited sectors such as retail and real estate as investors rotated positions.
The broad Topix rose 1.3% as of 0131 GMT, and was earlier up as much as 2.4%.
Lower crude prices tend to support Japan Inc, because the resource-poor country imports almost all
its energy needs, and mostly from the Middle East. Meanwhile, the tech-heavy Nikkei slid 0.5%, weighed down by stocks such as chip equipment firms Advantest and Tokyo Electron, which plunged 10.3% and 8.6%, respectively.
“Funds that had previously been flowing into AI and semiconductors have shifted to other sectors,” said Wataru Akiyama, an equities strategist at Nomura Securities.
“There is now a growing view that the Democrats’ gains will lead to delays in data-centre plans, (meaning) the current pace of earnings growth may not be sustained,” he said.
However, “given the strategic competition between the US and China, it is unlikely that the trend in data-centre construction will be reversed,” he added.
The oversized drag from Japan’s tech giants was clear: 168 of the Nikkei’s 225 components were higher on Thursday, compared with 56 decliners and one that traded flat.
Twenty-five of the Tokyo Stock Exchange’s 33 industry groupings rose, led by a 6.5% rally for real estate, a 5.4% rise for retail and a 5.3% gain for pharma.
Uniqlo-operator Fast Retailing soared 7.9%.
Toyota climbed 5.3% ahead of its earnings report, due during the afternoon trading session. Sony and Nintendo will announce results after Thursday’s close, and were up 6.6% and 4.6%, respectively.
Shipping was the worst-performing sector amid prospects for lower freight rates if the Middle East conflict eases.
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