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Stocks

Nintendo's Switch flips market cap to 9-year high

Console maker's partnership with China's Tencent also excites investors

Nintendo's Switch is a home video game console that also can be enjoyed like a handheld system.

OSAKA -- Three straight days of gains have propelled Nintendo's market cap beyond 6 trillion yen ($53.8 billion) for the first time in nine years, as the game company benefits from fervent demand for its newest console and excitement over a tie-up with China's Tencent Holdings.

Nintendo shares closed 4.7% higher at 42,890 yen Wednesday on the Tokyo Stock Exchange, producing a market capitalization of 6.07 trillion yen. The company ranks as the 11th largest on the exchange behind Japan Post Bank at 6.2 trillion yen.

The engine driving this rise has been the Switch, Nintendo's latest console, which continues to sell out soon after hitting store shelves. Reports last week that a popular game produced by internet giant Tencent will come to the Switch platform also buoyed the Japanese stock.

"Speculation is spreading that Nintendo will fully enter China and cultivate that market through its partnership with Tencent," said Hideki Yasuda of Ace Research Institute.

Nintendo's longtime strategy involves selling both gaming hardware and software. When the Wii debuted nine years ago, the popularity of its health-conscious games and other software helped boost earnings. But poor sales of Nintendo's next console, the Wii U, led to three straight years of operating losses starting in fiscal 2011.

The Switch, like the original Wii, introduces a new way to play on a familiar platform. Though the Switch is a home video game console, a smaller screen can be detached and used outside.

Some industry analysts wonder whether Nintendo can maintain this momentum into the busy holiday season with limited supplies of its hit product. The company will have to expand production capabilities quickly to maintain its high stock price.

Nintendo forecasts a 120% surge in consolidated operating profit to 65 billion yen for the year that ends in March, thanks to the Switch. The QUICK Consensus survey of market analysts pins the figure another rung higher at 127.1 billion yen. 

(Nikkei)

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