Chip-Maker Gains Boost Japan’s Nikkei; Chinese Investors Worried About Valuation, Tighter Monetary Policy

The major Asia-Pacific stock indexes finished higher last week, mostly taking their cues from Wall Street which also posted a formidable gain as the benchmark S&P 500 Index posted a record high. Gains may have been capped, however, because of the lack of progress toward another round of fiscal stimulus in the United States and rising global coronavirus cases which threaten the pace of the economic recovery.

In the cash market last week, Japan’s Nikkei 225 Index settled at 23289.36, up 959.42 or +4.30 %. South Korea’s KOSPI finished at 2407.49, up 55.82 or +2.37% and Hong Kong’s Hang Seng Index closed at 25183.01, up 651.39 or +2.66%.

China’s Shanghai Index settled at 3360.10, up 6.06 or +0.18% and Australia’s S&P/ASX 200 Index finished at 6126.20, up 121.40 or +2.02%.

Nikkei Rises to 6-Month High, Rally Led by Chip-Related Shares

Japan’s Nikkei share average scaled a near six-month high on Thursday, driven by strong gains in semiconductor-related stocks, with investors sticking to hopes that Washington will deliver stimulus even as talks between U.S. lawmakers stall, according to Reuters.

The Nikkei rose above its July 9 peak to hit its highest level since February 21, almost fully recovering from its decline since the start of the COVID-19 pandemic. Meanwhile, the broader Topix rose 1.10% to 1,623.18, closing in on its June peak.

Semi-conductor related shares advanced on hopes for more chip demand related to new technologies, such as 5G communication, after strong gains in global peers.

Chip-making machine maker Tokyo Electron rose 3.3% while Murata Manufacturing, manufacturer of capacitors and other electronic parts, added 2.7%., Reuters reported.

Precision machine makers were the top performer among the 33 Topix industry sub-indexes. Olympus jumped 3.3% to a record high, while Terumo rose 3.8%.

Pan Pacific International Holdings jumped 8.3% following brisk earnings growth and a dividend hike, while Secom rose 4.9% after consensus-beating earnings.

China Stocks Close Marginally Higher After Avoiding Weekly Loss

China stocks finished marginally higher last week after a small rally on Friday helped avoid a weekly loss. Investment sentiment was primarily dented by weakness in technology shares, worries over policy tightening and rising Sino-U.S. tensions.

Tech firms led the retreat last week. ChiNext was down 4.5% for the week, set for its steepest weekly drop in nearly five months, while the STAR50 Index sank 4.3%.

China’s recovery after its pandemic crash earlier in the year has been primarily driven by pent-up demand, government stimulus and surprisingly resilient exports, which are helping to propel and economic recovery. However, investors now seem a little “hesitant to buy stocks with lofty valuations and substantial gains this year, and are beginning to seek opportunities in cheap stocks with safety margin including those in traditional industries,” according to Xia Tian, managing director at Shanghai-based asset management firm Minvest.

The biggest fear for investors is a possible marginal tightening of monetary policy that could take place due to the extent of China’s economic recovery in the first half of the year.