Japanese blue chip stocks may struggle to move higher in coming months as Wall Street falters but a bull run in the shares of smaller firms, whose market index is near three-and-a-half-year highs, shows little sign of ending.
The Nikkei Jasdaq average, which covers all stocks listed on the Jasdaq market for start-ups, ended up 0.02 point at 1,645.04 on Friday, extending its winning run into a twelfth session.
At one point it went as high as 1,645.98, its highest level since September 2000 - in sharp contrast to the Tokyo Stock Exchange's benchmark Nikkei 225 average, which fell for a third straight day on Friday, losing another 1.19 percent.
"Investors have been scooping up OTC stocks as they're less dependent on Wall Street, with its volatility, and won't be hit hard by currency moves. The market's upward trend isn't expected to end for a while," said Shuichi Hida, portfolio manager at Plaza Asset Management.
The Jasdaq market, where transactions are conducted directly between brokerage firms, is often referred to as the over-the-counter (OTC) market in Japan.
"Profits made by investing in successful IPO (initial public offering) stocks are also flying back into the OTC market, giving it very good liquidity," said Hida, who expects the Nikkei Jasdaq average to reach 1,800 this year.
The Nikkei 225 average has risen about six percent so far in 2004 but has been undermined in recent sessions by losses on Wall Street, which have offset a string of upbeat reports on the Japanese economy.
In contrast, the Nikkei Jasdaq has risen 20 percent this year, led by a 44-percent year-to-date jump in Rakuten Inc, Japan's largest Web-based shopping mall operator. Small investors account for about half of all trading on the Jasdaq market, eager to find higher dividend yields, even if that means taking on more risky stocks.
The average dividend yield on Jasdaq stocks stands at 1.48 percent compared with 1.11 percent for Tokyo Stock Exchange first section stocks, according to the Nihon Keizai daily.
The Jasdaq stocks' price-earning-ratio (PER) of 25.84 was below the 27.28 for Nikkei 225 stocks as of Thursday, suggesting there were bargains to be had among OTC stocks.