April 23, 2014 4:23 am JST

As Nikkei falls, Japanese companies profiting in Asia hit highs

TOKYO -- Japanese businesses generating solid profits in Asia are drawing the attention of investors in the Tokyo stock market, as shown by their rising prices.

     "Consumer spending in Asia is largely expected to grow, with Japanese companies there poised to reap the benefits in the medium to long term," explains Kazuharu Konishi, chief fund manager at Mitsubishi UFJ Asset Management.

     The Nikkei Stock Average slid 123.61 points, or 0.85%, to end at 14,388.77 on Tuesday, but shares associated with Asia rallied. Kao, a manufacturer of daily goods, briefly shot up 2% to a year-to-date high of 3,721 yen ($36). Shin-Etsu Chemical reached a new 2014 peak. Lactic acid drink manufacturer Yakult Honsha climbed 2% at one point to 5,330 yen, just shy of its 5,370 yen high for the year set on Jan. 21.

     Asia-related shares have gained since the end of March. The Nikkei average is down 3%, while Shin-Etsu Chemical, Yakult and Kao are all higher, reflecting hopes that their earnings will improve on the back of Asian markets.

     Shin-Etsu Chemical announced Monday it will break ground on a production facility for rare-earth magnets in Vietnam, while Kao generated some 10% of group operating profit for the year ended last December in Asia outside of Japan. Yakult's sales of lactic acid drinks are brisk in Asia, a factor that helped push group net profit for the April-December period to a record.

     "Forward-looking investments in Asia tend to be welcomed" by stock investors, says Keita Kubota, investment manager at Aberdeen Asset Management.

     Toru Nishihama, chief economist at the Dai-ichi Life Research Institute, is tracking consumer spending growth in Indonesia and India and expects those economies "to continue to grow regardless of overseas trends."

     Emerging-market assets are drawing renewed interest from investors who expect monetary easing in Japan, the U.S. and Europe to continue for the long haul. While the Nikkei index has tumbled since the end of March, Asian stock markets have bounced back. "They offer high potential growth to begin with, paving the way for inflows of investor money once market conditions stabilize," says Ichiro Yamada at Fukoku Mutual Life Insurance.

     The effects of slowing economic growth and widespread shadow banking in China are a major concern for Asian economies. "China and Asian economies are closely linked, so Asian shares may see limited buying until a clearer picture of the Chinese economy emerges," notes an official at Daiwa SB Investments.