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'Pokemon Go' helps push Nintendo stock 2.5 times higher

New Switch console expected to further burnish company's growing appeal

"Pokemon Go" in action

TOKYO -- Game giant Nintendo received a massive boost after the debut of "Pokemon Go" in July 2016. Now the company has another hit in its Switch gaming console, keeping shares at eight-year highs and making Nintendo a favorite on the Tokyo bourse.

"Pokemon Go" is a mobile game featuring characters from Nintendo's popular "Pocket Monsters" game series. Jointly developed by Pokemon, a Tokyo-based Nintendo affiliate, and American software developer Niantic, the free game employs location-based augmented reality to let users catch and manipulate virtual monsters that appear in the real world.

Global downloads of "Pokemon Go," first released in the U.S. and a few other countries last July, totaled 750 million as of June 9 this year, theoretically meaning that one of every 10 persons in the world has downloaded the game.

Proceeds for additional in-game items totaled $950 million at the end of 2016, according to app intelligence company App Annie. As the number of game characters rises, so does the number of Pokestops and Gyms -- real locations where game items can be gathered and where characters fight, respectively.

The reality of "Pokemonomics"

"Pokemon Go" has given Nintendo a shot in the arm after its Wii U gaming console flopped. Despite the success of the Nintendo DS hand-held console and Wii, the company "failed to ride the wave of smartphones and was left out in the cold," said an analyst at a domestic securities house.

The popular game has drastically changed the company's outlook, however, enabling Nintendo to showcase the strength of its characters.

The "Pokemon Go" craze sent Nintendo stock soaring to 32,700 yen on July 19, 2016, the highest in six years and three months. In addition, stocks of semirelated companies such as First Baking, which puts Pokemon seals on bakery products, climbed nearly across the board -- a knock-on effect called "Pokemonomics."

14.3 million Switch consoles

Nintendo stock rose further to 37,030 yen on Monday, the highest since Oct. 15, 2008. The price represents an approximate 2.5 times increase since before "Pokemon Go" was released overseas, raising Nintendo's market capitalization to more than 5 trillion yen($44.8 billion).

Attention has now shifted from "Pokemon Go" to Switch. The new console has sold-out at large retailers and e-commerce sites, and consumers are having a hard time finding it.

In the first month following its debut, Switch sold 2.74 million units worldwide. While Nintendo plans to ship 12.7 million units by the end of March 2018, the number is actually projected to hit 14.3 million, based on averaging the forecasts of 14 leading domestic and overseas analysts.

Switch will become "the second biggest hit after Wii in Nintendo's history," said Satoshi Kurihara, a senior analyst at Tokai Tokyo Research Institute.

A total of 15.2 trillion yen worth of Nintendo shares were traded in 2016, up 3.6 times from the previous year. This accounted for 2.7% of all transactions of the Tokyo Stock Exchange's first section, many by individual investors and overseas investment funds. The trades topped those of Softbank Group and Mitsubishi UFJ Financial Group by 1.2 and 1.1 times, respectively.

Overseas investors, such as Norges Bank Investment Management of Norway as well as American asset management companies OppenheimerFunds and T. Rowe Price International, had boosted their holdings of Nintendo shares by March, according to QUICK-FactSet.

More hits coming

Nintendo disclosed last week that it will release "Super Mario Odyssey," a new video game for Switch, on Oct. 27. The announcement was made at Electronic Entertainment Expo in the U.S., a major event for game enthusiasts. The company also said it is developing a new version of "Metroid" -- a sci-fi action-adventure game popular in the U.S. -- along with a role-playing game in the Pock Monsters"Pokemon" series.

As Nintendo releases promising games for Switch toward the end of the year, sales of the console will "gather steam," said Haruka Mori, an analyst at JPMorgan Securities Japan.

The company will require paid accounts for online game matching and distribution of popular existing games, starting in 2018. This strategy is expected to help Nintendo "keep a high ratio of active users who frequently play games on Switch," Mori said.

Market expectations appear likely to keep growing.

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