The advance was led by semiconductor and tech shares, which surged after Samsung Electronics indicated signs of a recovery in the battered memory chip market. Investors bought up beaten-down growth stocks, sensing the market selloff may have run its course.
The Nikkei had fallen close to 10% from its 33-year peak in June, sinking to a four-month low last week amid concerns over rising U.S. Treasury yields. However, the index has now posted gains for three straight sessions as bullish sentiment returns.
“The market was firm overall. Investors bought back stocks that fell in recent sell-offs. They realized that the fundamental for Japanese economy has not changed,” said Ikuo Mitsui, fund manager at Aizawa Securities in Tokyo.
Samsung Earnings Boost Chipmakers
The biggest boost for the Nikkei came from the semiconductor sector after Samsung indicated a bottoming out for the industry’s downturn. Although the Korean tech giant posted a 31% drop in Q3 profit, it was better than analyst estimates.
Chip-related shares surged on expectations that demand is improving. Tokyo Electron, which makes semiconductor manufacturing equipment, jumped 2.94% to become the Nikkei’s top performer. Testing equipment maker Advantest rallied 4.03%.
Lasertec, Renesas Electronics and other chipmakers also posted strong gains. Investors are betting that earnings have bottomed and a recovery has begun after a severe industry slump.
“Samsung’s earnings confirmed for investors that the performance of the semiconductor industry has hit the bottom,” said Mitsui of Aizawa Securities.
Refiners, Energy Stocks See Divergence
In stock-specific moves, Idemitsu Kosan rose 5.58% after announcing an alliance with Toyota to develop all-solid-state batteries for electric vehicles. The move is part of Idemitsu’s push into green businesses.
On the downside, energy explorers declined 0.8%, making them the worst performing sector on the Tokyo Stock Exchange. As oil prices fell, Inpex Corp dropped 1.14% and Japan Petroleum Exploration Co shed 2.63%.
Overall, advancers dominated decliners on Thursday, with 179 Nikkei components rising compared to only 46 that lost ground. The rally lifted Japanese stocks back near levels last seen before the recent market turbulence.
Nikkei Rebound Seen Continuing
Analysts say the Nikkei’s rebound could have further room to run as some investors are still underinvested after sitting out the selloff. However, any renewed surge in Treasury yields or hawkish signals from the Fed could spark another downturn.
For now, bulls are in control as bargain hunting and short covering fuel gains. The Nikkei’s price-to-earnings ratio has also fallen to just 11.5, far below S&P 500’s P/E of nearly 20. That leaves Japanese stocks looking attractively valued and primed for more upside.