TOKYO -- Construction and food companies continue to attract buying in the stock market while retailers and brokerages have come under selling as investors focus on businesses that have been able to pass on higher costs to customers.
Of the 36 subindexes making up the Nikkei Stock Average, the index tracking the construction industry has risen the most, or 14.4%, between the start of the year and Tuesday, while the index for securities brokerages has tumbled 22.1%. The overall Nikkei average has dropped 4.7% over the period.
On Tuesday, retail stocks declined noticeably. The share price of Ryohin Keikaku, operator of the Muji store chain, dropped 5% at one point, and the stocks of electronics retailer Yamada Denki and convenience store operator FamilyMart briefly dipped 4% or so.
News from an industry association that shipments of white goods shrank 16% on the year in July in value terms likely weighed down those stocks. Although the common view is that Japan's real economy has returned to a recovery track after a temporary decline in the April-June quarter, "investors trying once again to weigh the impact of the sales tax hike turned to selling," says Kazuharu Konishi, chief fund manager at Mitsubishi UFJ Trust and Banking.
Shares of stock brokerages and real estate companies have been top-heavy after undergoing corrections through May. These stocks had earlier advanced sharply amid the tail wind of monetary easing, but have since been in retreat.
Meanwhile, industries managing to raise prices on products and services have been performing well. The Nikkei subindex for construction companies, for instance, stands at the highest level in eight years and four months, underpinned by hopes that investment in public works projects will increase.
Kajima, which rose 5% at one point on Tuesday, is likely to enjoy better profitability as it charges higher prices in its mainstay construction business, according to Kentaro Maekawa, research analyst at Nomura Securities. He upgraded his investment recommendation for the company.
Similarly in the food industry, shares in Megmilk Snow Brand, which has raised prices of butter and cheese since July, also hit a year-to-date high.
The latest remarks by U.S. Federal Reserve Chair Janet Yellen failed to provide much direction for the Japanese stock market. "Investors will likely maintain their wait-and-see stance for a while," says Tomonori Oshima, senior fund manager at Sumitomo Mitsui Asset Management,