Nikkei up 16% in 2020 for highest year-end close since 1989

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Tokyo stocks closed lower Wednesday, the final trading session of the year, but the Nikkei index advanced 16 percent in 2020, gaining for the second consecutive year to reach its highest year-end finish since 1989 despite the coronavirus pandemic.

The 225-issue Nikkei Stock Average ended down 123.98 points, or 0.45 percent, from Tuesday at 27,444.17 as investors locked in gains from the previous day’s rally.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 14.50 points, or 0.80 percent, lower at 1,804.68.

The Nikkei finished trading in 1989 at a record high of 38,915.87 in the midst of Japan’s asset-inflated bubble economy.

The U.S. dollar edged down to the lower 103 yen zone as traders sought the perceived safety of the yen amid an unclear outlook for the $ 2,000 COVID-19 relief payment bill in the Republican-controlled Senate.

The Nikkei started 2020 above the 23,000 yen mark but plunged to 16,552.83 in March due to the new coronavirus outbreak. The index gradually recovered on the back of massive monetary easing and fiscal stimulus around the world, brokers said.

A clearer U.S. political outlook after the November presidential election and growing hopes for normalized business activities with vaccines lifted the Nikkei in the last couple of months, hitting its 30-year high finish of 27,568.15 on Tuesday.

Recalling that it took years for Tokyo equities to recover from the global financial crisis following the 2008 collapse of Lehman Brothers, Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co, said “The Nikkei was tossed up and down by the coronavirus this year.”

The benchmark’s recovery was led by business improvements especially in firms related to high-technology and stay-at-home demands, as the new lifestyle of keeping social distance prevailed amid the pandemic, brokers said.

“If vaccines become widely available and raise demand for retail and service companies that were hit hard by the pandemic, that could push share prices up further in 2021,” said Maki Sawada, a strategist at Nomura Securities Co’s Investment Content Department.

“The Nikkei may reach the 30,000 mark if the economy and businesses recover as expected in the best case scenario,” Sawada Said.

On Wednesday, stocks fell from the opening, tracking overnight falls on Wall Street, but the Nikkei trimmed losses toward the end of the session.

“The index fell on investors locking in gains from an over 700 point rise the previous day, but some issues were bought back,” Sawada said.

Decliners were led by pulp and paper, iron and steel, and text and apparel issues.

But investors refrained from making bold moves ahead of the U.S. Senate runoff election in Georgia next week, said Toshikazu Horiuchi, equity strategist at IwaiCosmo Securities Co.

The election will determine which party holds the majority in the Senate. Victory for President-elect Joe Biden’s Democratic Party would give it control of both chambers of Congress.

“The main scenario is a divided Congress, so any different scenario may cause a shock. If rising interest rates and a tax hike come into focus, they may be seen as selling factors,” Horiuchi said.

On the First Section at the TSE, declining issues outnumbered advancers 1,507 to 607, while 73 ended unchanged.

Nippon Steel sank 27.50 yen, or 2.0 percent, to 1,328.00 yen, and JFE Holdings slid 33 yen, or 3.2 percent, to 988 yen.

Mitsubishi Materials sagged 48 yen, or 2.2 percent, to 2,170 yen, while Sumitomo Electric Industries dropped 32.00 yen, or 2.3 percent, to 1,366.50 yen.

Bucking the downward trend, department store operators rose on hopes of an increase in demand for “osechi” New Year dishes as the coronavirus outbreak is expected to force people to spend more time at home.

J. Front Retailing rose 6 yen, or 0.7 percent, to 815 yen and Takashimaya gained 8 yen, or 0.9 percent, to 885 yen.

Trading volume on the main section fell to 878.19 million shares from Tuesday’s 1,020.87 million shares.

© KYODO

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