TOKYO -- Suppliers of materials for electric cars may become a new driver of Tokyo shares as the sector attracts money from retail investors in a generally stagnant market.
The Nikkei Stock Average rose for the first time in three sessions Friday, but many investors closed out positions ahead of a three-day weekend. With market participants awaiting next week's monetary policy moves by the Bank of Japan and the U.S. Federal Reserve, blue chips are not moving much.
Plug me in
Suppliers of electric-car materials are drawing retail investors looking for a new industry to focus on. A 30-something day trader here said he had recently focused on such game stocks as Nintendo -- buoyed by the "Pokemon Go" effect -- but now wants to pursue electric-car-related shares. The 11-year veteran investor, who usually closes out positions in a few days at the most, will consider trading them over time frames of two weeks or longer.
Market drivers show how money moves from one sector to another. Casualwear seller Adastria hit a year-to-date high in late June, thanks to a rise in visitors to Japan, only to plunge thereafter. Pharmaceutical startup PeptiDream, previously a market darling, has slid roughly 30% from the end of March, while Nintendo has surged about 70%.
Meanwhile, the Nikkei average has remained boxed in.
Manufacturers of materials for electric cars seem to be the latest hot stocks. W-Scope, which produces separators for lithium-ion batteries, has gained about 20% since the end of August. And electrode materials maker Tanaka Chemical has jumped nearly 40%.
Built to last?
These fevers are often short-lived. But the materials stocks may have more lasting appeal, given that their rises are supported by earnings now, in contrast to previous industry booms, said Mitsushige Akino of Ichiyoshi Asset Management.
W-Scope enjoys an operating margin of 26% and expects a second straight year of record profit in 2016. It has focused on sales to China, which is promoting electric vehicles under a national strategy. The company aims to control nearly 10% of the global market. With the U.S. regulatory climate increasingly favorable for electric vehicles, such overseas investors as American fund Matthews stepped up investment in W-Scope through mid-August.
But shares in builders of the finished vehicles are far from energetic. Nissan Motor and General Motors have fallen 1-2% from the end of August. Uncertainty over the global economy has cast a shadow over their gasoline-powered mainstays, and they have invested broadly for the future. "It is difficult to determine which operations will produce profits," said Keita Kubota of Aberdeen Asset Management.
The materials makers often do not belong to major automaker groups. So they are free to capitalize on their expertise, depending on demand trends, switching focus to American, Japanese, European and Chinese customers as needed.
The yen's direction will become clearer after the BOJ and Fed announcements, with the equities market also settling into a groove. If the materials makers remain robust at that time, it may be a sign that they could be medium- to long-term growth stocks.