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Value of Japan's midcap stocks surged 30% in 2017

Investors on the hunt for ventures in new markets and high growth fields

TOKYO -- Japan's midcap stocks are catching the eye of investors hoping that emerging companies can turn proprietary technology and unique business models into robust profit growth.

Nikkei calculated the aggregate market capitalization of roughly 1,000 listed firms with sales of 10 billion yen ($88.5 million) or less. The average value of these companies, which Nikkei has dubbed the Next1000, climbed 30% in 2017, compared with a 19% increase for the overall market.

The Next1000's total market cap has risen 50% to 5.22 trillion yen since its creation five years ago as investors look to young businesses with growth potential. The value of all listed companies increased 47% over the same period.

Biotech venture PeptiDream's market cap rose the most of any Next1000 company in 2017, adding 77.1 billion yen since the prior year. The company booked a record profit for the year ended in June -- its seventh straight net profit -- by growing its client base. The company is known for a proprietary platform that enables promising new drug candidates to be identified quickly.

News app Gunosy came in No. 3 after growing its market cap by 39.9 billion yen in 2017 as it attracted more users with television commercials and other promotions. Growing in-app ad revenue and a move in December from the Tokyo Stock Exchange's Mothers market for startups to the blue chip-heavy first section also invited more buying.

Internet-related ventures such as smartphone content creator Drecom and security software company Digital Arts also dominated the upper end of the rankings. Investors are betting on rapid growth for companies cultivating new markets.

As share prices and market caps climb, it becomes easier for companies to conduct acquisitions or raise funds by issuing stock. A favorable environment that accelerates further growth is expected as companies become more aggressive.


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