TOKYO: Japan’s Nikkei share average dropped sharply from a 33-year high on Tuesday as some investors swooped in to take profits following a breathless eight-day rally.
The Nikkei started the day strong, reaching a fresh peak at 31,352.53 - a level last seen in August 1990 - but pared gains after the midday break, attracting more sellers.
Declines cascaded quickly to push the benchmark down as much as 0.83% before the index closed the day down 0.42% at 30,957.77.
In an unusual move that perplexed traders, Toyota Motor Corp tumbled 4.77% in the final moments of trading to be the Nikkei’s biggest decliner.
The broader Topix fell 0.66% to 2,161.49.
“The Nikkei started to look top heavy in the afternoon, which invited some profit-taking,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.
However, Ichikawa still forecasts a climb to 33,500 by year-end. “Foreign investors are really snapping up Japanese shares at the moment, so the trend higher for the Nikkei is likely to continue.”
Overseas players have been the main driver of the rally, drawn by the Tokyo Stock Exchange’s (TSE) push for better corporate governance and Warren Buffett’s increased investment in Japanese trading companies.
The Nikkei had surged about 7.7% since May 10 to reach Tuesday’s high, sending a popular technical indicator called the 14-day relative strength index (RSI) above 85.
Readings higher than 70 on a scale to 100 are generally considered overbought.
Some market players also pointed to an announcement from Japan’s trade ministry that export restrictions on cutting-edge chip technology would take effect in July.
Tokyo stocks close up, Nikkei hits fresh 33-year high
Chipmaking equipment giant Tokyo Electron declined 2.57% to be the biggest drag on the Nikkei, shaving off 49 index points. Chip-testing machinery maker Advantest slipped 1.67%.
Other chip-related stocks proved more resilient though, with Trend Micro and Renesas Electronics among the Nikkei’s top gainers, adding 2.94% and 2.21%, respectively.
The best performer, Nippon Paper Industries Co, extended early big gains to end the day up 15% after Nomura upgraded the stock to “buy”.
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