Japan's Nikkei index closed up 2.17% at 65,416.63 on Tuesday, rebounding from a 3.85% loss on Monday, its largest one-day drop in three months. The gains were driven by strong performances from chip-making equipment maker Tokyo Electron and chip-testing equipment maker Advantest, which rose 8.91% and 4.34%, respectively.
The broader Topix index also saw an increase, rising 1.14% to 3,896.11. Earlier in the session, the Nikkei experienced choppy trading, dipping as much as 0.16% before recovering. Technology investor SoftBank Group and fibre optic cable maker Fujikura reversed earlier losses, ending 1.03% and 2.23% higher, respectively.
"Confidence for AI-related shares remains strong, but there was caution for the fast-paced rally in the market earlier in the session," said Kazuaki Shimada, chief strategist at IwaiCosmo Securities. Investors might have sold stocks to raise funds for SpaceX's upcoming IPO.
“Confidence for AI-related shares remains strong, but there was caution for the fast-paced rally in the market earlier in the session.”
Kazuaki Shimada, Chief Strategist at IwaiCosmo Securities
The Nikkei had previously crossed above 68,000 to a record high earlier this month, buoyed by optimism surrounding AI-related shares. The index has gained nearly 30% year-to-date. Monday's sell-off followed declines in U.S. technology stocks late last week.
Financial stocks also rose on Tuesday as the market anticipated the Bank of Japan's interest rate hike at its policy meeting next week. Mitsubishi UFJ Financial Group and Mizuho Financial Group saw gains of 0.38% and 1.69%, respectively. However, Fast Retailing, owner of the Uniqlo brand, fell 0.96%, exerting downward pressure on the Nikkei.
Of the more than 1,500 stocks trading on the Tokyo Stock Exchange's prime market, 53% rose, 42% fell, and 3% traded flat. The market's focus now shifts to the Bank of Japan's upcoming policy meeting and the potential impact of SpaceX's IPO on investor behavior.
Background
The Nikkei index has been on an upward trajectory, crossing 68,000 earlier this month due to optimism about AI-related stocks. The recent volatility reflects broader market trends influenced by U.S. technology stocks and anticipation of monetary policy changes.
The market's focus now shifts to the Bank of Japan's upcoming policy meeting and the potential impact of SpaceX's IPO on investor behavior.
