Topix Strengthens, Sector Rotation Reappears
Japanese stocks rallied on Wednesday after the market picked up signs of a de-escalation in the Middle East conflict, following reports that the US was drafting a 15-point plan to help end the Iran war. The Topix index closed up 2.6% to 3,650.99, while the Nikkei 225 gained 2.9% to 53,749.62.
The gains were broad-based, with approximately 90% of Topix stocks posting gains. The main catalysts came from the electrical equipment and banking sectors, which were the largest contributors to the index's gains, reflecting improving risk appetite as the market assesses the likelihood of a ceasefire.
IwaiCosmo Securities believes that although uncertainty remains high, progress toward a ceasefire appears to be "strengthening" after nearly a month of conflict. If geopolitical tensions truly ease, oil prices could potentially fall and equities could continue to rally, although for now the market is considered to be in a consolidation phase at new levels.
On the other hand, selective weakness has emerged in software stocks. Baycurrent and Shift were among the biggest decliners on the Nikkei, tracking pressure in similar Asian stocks after reports of Amazon's development of a new AI tool resurfaced concerns about disruption and depressed demand for legacy products in the sector.
Looking ahead, the Tokyo market is expected to remain sensitive to two key variables: clarity on the US-Iran diplomatic path (which impacts energy risk premiums) and the direction of sector rotation from defensive to cyclical if oil weakens significantly. Meanwhile, certain technology sectors could remain volatile due to the risk of AI disruption.
Source: Newsmaker.id
