Japan’s Nikkei edges lower, big tech shares drag amid valuation worries

TOKYO: Japan’s Nikkei share average edged lower on Monday, weighed by tech stocks amid continued investor caution about sky-high valuations for artificial intelligence-related shares.

At the same time, a more stable yen after a bout of strength in recent weeks supported the broader market, even with rising market bets for a Bank of Japan interest rate hike next week.

Gains for Wall Street on Friday provided an additional tailwind.

The Nikkei declined less than 0.1% to 50,473.84 as of the midday recess.

The broader Topix, by contrast, added 0.4% to 3,376.43.

The biggest drag on the Nikkei was startup investor SoftBank Group, shaving 93 points from the index with a 2.5% slide.

Next was chip-testing equipment maker Advantest, which fell 0.9%, followed by chip-making machinery manufacturer Tokyo Electron, which lost 1%, subtracting a combined 79 points from the index.

“There’s a sense of overheating in high-tech stocks, making them susceptible to selling pressure,” said Fumika Shimizu, an equities strategist at Nomura Securities.

“The underlying trend of falling tech stocks remains intact.”

Overall, though, winners vastly outnumbered losers on the Nikkei, with 162 of its 225 components rising, 59 falling, and four trading flat.

The index rose to a record high of 52,636.87 in early November before succumbing to profit-taking, centered on AI-related shares.

“The Nikkei feels heavy,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

“For the time being, I expect stocks to trade sideways. A rise from here would come with high risk.”

Despite the fall in chip-related shares, stocks tied to expectations of increased demand for data centers were among the top performers on the Nikkei.

Fujikura soared 5.7% and Fuji Electric jumped 4.1%.

The best-performing sector among the Tokyo Stock Exchange’s 33 industry groups was real estate, which climbed 2.6%.

Banking lost 0.7% to be the bottom performer, but that was after rising to the highest level since 1999 last week on expectations the BOJ will resume hiking rates.