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Japan stocks lead gains in Asia with Nikkei hitting fresh 34-year highs; Singapore budget on tap

·3 mins

Japan’s Nikkei 225 on Course for All-Time High as Markets Gain in Asia-Pacific

Japan’s Nikkei 225 reached a fresh 34-year high, leading the gains in Asia markets. The index is on track to reach all-time record levels. It traded 1.07% higher, following its loss of the spot as the third-largest global economy to Germany and entering into a technical recession. The economic slowdown has raised hopes of Japan maintaining its ultra-loose monetary policy for a longer duration. Other Asia-Pacific markets also rose, with the S&P 500 notching a fresh record high. Mainland China markets remain closed due to the Chinese New Year holidays. Investors are awaiting Singapore’s 2024 budget release later in the day.

Morgan Stanley Expects Nikkei to Reach All-Time High

Morgan Stanley believes that the Nikkei 225 is set to hit all-time highs as the index surpasses 38,600 points and scales 34-year highs. In a research note, Morgan Stanley maintains its bullish stance on Japan equities, stating that a new all-time high for the Nikkei is “imminent.” The economists predict that the index is likely to break the previous all-time high of 38,916, set in December 1989. Currently, the index is trading 1.37% higher.

Japan’s Finance Minister Says Timing for Ending Negative Rates is Bank of Japan’s Decision

Japan’s finance minister, Shunichi Suzuki, has stated that the Bank of Japan holds the authority to decide when it will end its negative interest rate policy. This comes after Japan’s economy slipped into a technical recession, losing its status as the world’s third-largest economy to Germany. The weak gross domestic product data has created anticipation that the central bank might maintain its ultra-loose monetary policy for an extended period. Suzuki acknowledges the various opinions in the market regarding the impact of the GDP data on the timing of the central bank’s policy changes.

S&P 500 Closes at New Record High

The S&P 500 index achieved a new record closing high by rising 0.58% to 5,029.73. The Dow Jones Industrial Average added 348.85 points, or 0.91%, to reach 38,773.12. The Nasdaq Composite also gained 0.30% for a closing value of 15,906.17.

Capital Economics Remains Bullish on S&P 500, Sets High Target Price

Capital Economics suggests that concerns about the valuation of the S&P 500, which closed above 5,000 for the first time, are unwarranted. The research firm’s chief market economist reveals a price target in a note to clients, stating that the “bubble may be far from bursting.” Their analysis indicates that the rally still has room to run.

Oil Prices Rally on Weaker Dollar

Oil prices experienced a rally despite a weak demand forecast for 2024. The West Texas Intermediate contract for March gained $1.46 to $78.10 a barrel, while the Brent contract for April traded at $82.83 a barrel, adding $1.23. Oil prices found support from a weakening dollar after U.S. retail sales for January fell more than expected. The International Energy Agency forecasts a lower demand growth rate of 1.2 million barrels per day this year, compared to the growth of 2.3 million barrels per day seen in 2023.

Morgan Stanley Identifies Asian Companies Benefiting from AI Boom

Morgan Stanley highlights the “underappreciated beneficiaries” of AI in the Asia-Pacific region. Japan stands out, with 53% of companies seen as AI beneficiaries, nearly matching the figure for the United States at 54%. The research firm identifies several names in their screens of AI beneficiaries in Asia that have significant potential for outperformance over the next 12 months.