Recent upturns in stock prices in both Japan and the United States reflect growing expectations for full-fledged economic recovery among market players, who have been increasing their investment in stocks.
The 225-issue Nikkei index on the Tokyo Stock Exchange recently temporarily surpassed levels seen before the coronavirus crash.
However, concerns have been voiced about the future, as the real economy has been in a slump due to deteriorating corporate earnings.
On Aug. 25, buy orders swelled from early morning on the Tokyo market due to growing expectations for new treatments and vaccine development for the coronavirus.
Among the 33 TOPIX Sector Indices, Air Transportation -- expected to benefit from an increase in the number of flights and passengers if the pandemic abates -- rose by 6% to a record high. Other indices sensitive to economic trends, such as Iron and Steel and Marine Transportation, also saw gains.
The Nikkei Stock Average plunged from late February to March due to concerns over the spread of the disease, and dropped to 16,552 yen on March 19. But stock prices in both Japan and the U.S. rapidly recovered in anticipation that strong regulations, such as another declaration of a state of emergency or lockdowns in major foreign cities, are unlikely to be implemented from now on.
"Market funds are abundant due to monetary easing," said Shoichi Arisawa of IwaiCosmo Securities Co. "Investors are taking authentic economic recovery into consideration."
However, among corporations listed in the First Section of the Tokyo Stock Exchange that closed their books in March, one in three posted a loss in the April-June quarter of 2020. Economic activity is expected to gradually resume, and corporate performance is expected to improve in the future. In the view of many analysts, major domestic companies will return to 90% of their pre-coronavirus level in the next fiscal year.
It is difficult to predict when the pandemic will come to an end, and there are many uncertainties that could affect stock prices, such as worsening U.S.-China relations and the U.S. presidential election in November.
"Current stock prices are too high in terms of corporate performance and forecasts," said Tsutomu Yamada, market analyst at au Kabucom Securities Co. "There are no signs of recovery to the 24,000 level."
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