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Stocks

New generation of blue chips driving Japan market cap growth

Keyence, Nintendo rise as old-economy Toyota loses ground

Nintendo is one of the companies whose market capitalization has surged on the Tokyo market.

TOKYO -- Japanese blue chips' combined market capitalization grew to a record Tuesday, buoyed by an emerging group of tech companies, video game giants and automation product manufacturers thriving in the age of worker shortages.

This new generation of players is replacing such old-economy stocks as automakers and banks as the engine for growth.

Shares listed on the Tokyo Stock Exchange's first section recorded a total market cap of 624 trillion yen ($5.59 trillion), rising to an all-time high.

Companies that profit from Japan's worsening labor shortages were big market cap gainers between Aug. 10, 2015 -- when the total for the TSE first section climbed to the previous record -- and Tuesday. The top honor went to Keyence, which logged market cap growth of 3.57 trillion yen. Short-staffed factories are buying the Osaka-based company's sensors for automating manufacturing processes, helping to lift its net profit to a record for the April-June quarter. With a margin reaching some 40%, Keyence has also won praise for its efficiency in earning income.

Mitsubishi Electric is also a player in the energy-saving field that won a thumbs-up from investors with a market cap gain of 890 billion yen. SMC recorded a rise as well.

The staffing information website operator Recruit Holdings saw its market cap nearly double since August 2015 with a 1.91 trillion yen jump. Japan's job openings-to-seekers ratio came to 1.52 for July, surpassing the level seen during the stock and real estate bubble years and marking the highest in about 43 years. The active labor market is expected to drive Recruit's earnings higher.

Tech companies also ranked high, lifted by global demand for semiconductors amid a growing smartphone market. Tokyo Electron's market cap surged 1.64 trillion yen, while Shin-Etsu Chemical and Nidec logged increases of 1.13 trillion yen and 830 billion yen, respectively.

"Tech companies have yet to appear overheated," said Yasuo Imanaka, an analyst at the Rakuten Securities Economic Research Institute. "Their buying is not a temporary phenomenon but rather a trend with legs."

Video game behemoth Nintendo ranked second with market cap growth of 2.31 trillion yen. The stock, which jumped as much as 7% at one point Tuesday and is now around a nine-year high, is popular among small investors and overseas players alike.

Companies in matured industries, in contrast, saw their presence decline. Toyota Motor remains Japan's most valuable enterprise by far, but it lost a whopping 5.87 trillion yen in market cap during the last 25 months. Honda Motor's figure also slid by 1.98 trillion yen, while Nissan Motor suffered a decline as well.

Automakers are "hurt by decreased automobile ownership among younger consumers and unsteady foreign exchange rates," said Isao Kubo, equity strategist at Nissay Asset Management. They "just don't have the power to serve as the engine driving Japanese equities going forward," he added.

Banks are another sector in a slump. Their already-poor interest rate margins worsened after the Bank of Japan cut interest rates below zero in 2016. The three megabanks lost 6.2 trillion yen in aggregate market value, with Mitsubishi UFJ Financial Group's figure shrinking by 2.65 trillion yen.

(Nikkei)

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