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Markets

Nintendo soars past Tokyo Disney operator in stay-at-home world

'Social distancing' stocks drive Japan market rebound

A Nintendo store in Tokyo: The video game company's market valuation has jumped.   © Reuters

TOKYO -- Companies poised to benefit from the changes wrought by the coronavirus pandemic have emerged as drivers of a budding recovery in Japan's stock market.

The Nikkei Stock Average rose 422 points, or 2%, Thursday to close above 20,000 for the first time in nearly two months and recover more than 20% from a low plumbed in March.

As expectations build for reopening locked-down economies around the world, investors are hunting for companies able to respond to the demands of a new era of living with the virus. Three key themes in this search are "no contact," "at home" and "medical."

"Now that people have learned the advantages of not going into the workplace or to the hospital, their behavior will fundamentally change," said Hiroshi Matsumoto, head of Japan investment at Pictet Asset Management in Tokyo.

Companies that support telework or serve homebound consumers have ridden this trend to higher valuations. With a recent surge, video game maker Nintendo's market capitalization surpassed that of Tokyo Disney Resort operator Oriental Land, a leader in the pandemic-ravaged entertainment sector. Shares of the company behind escapist hit Animal Crossing are up around 1.5% since the end of last year, compared with a 14.6% decline by the Nikkei average.

In the U.S. stock market, Netflix and Microsoft are going strong. In Europe, Germany-based meal kit delivery service HelloFresh and British online grocer Ocado have soared.

Remote services are going mainstream. M3, the Japanese operator of a medical news platform for physicians around the world, remains in its record-high range and is up 18% compared with the end of last year. Medley, a Tokyo-based medical records software developer that went public in December, has seen its price more than double.

With demand high for telemedicine, U.S.-based Teladoc Health and China's Alibaba Health Information Technology have seen their stock prices double since the end of last year. U.S.-based online study help platform Chegg and Chinese tutoring service provider GSX Techedu are soaring. Peloton Interactive, the American company behind the indoor-workout platform, has trended higher.

Among health-related stocks, Chugai Pharmaceutical, which has announced plans for a clinical trial using its Actemra arthritis medication to treat patients with coronavirus-induced pneumonia, is up 27% compared with the end of last year.

"Awareness of public health will grow across the world, and the medical field will expand further," said Tetsuro Ii, president of Tokyo-based Commons Asset Management.

That said, the pandemic threatens to create a fierce struggle for corporate survival in a low-growth world. In the U.S., investor money is concentrating in tech giants like Google, Amazon.com, Microsoft and Facebook.

"As businesses and people refrain from active behavior, the global potential growth rate stands lower than before the coronavirus outbreak," said Mari Iwashita, chief market economist at Daiwa Securities.

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