Small-Cap Stocks

February 23, 2012 by staff 

Small-Cap Stocks, Kenji Abe, an equity strategist at Citigroup Global Markets Japan Inc., talks about the nation’s stock market. He also discusses the implications of Olympus Corp.’s accounting scandal on corporate governance in Japan. He speaks from Tokyo with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

Japan’s $250 billion in spending to rebuild after last year’s record earthquake is propelling the longest streak of advances in more than 50 years for the country’s smaller stocks.

Japan’s TSE Second Section Price Index (TSE2), a capitalization- weighted measure of smaller companies on the Tokyo Stock Exchange, rose yesterday for a 27th day, the longest series of gains ever, according to data compiled by Bloomberg going back to 1961.

Four stimulus packages totaling 21 trillion yen have fueled demand and lifted shares of companies that rely on the domestic economy, such as regional lender Kirayaka Bank Ltd. and Delica Foods Co. Japan’s retail sales rose in December by the most in 16 months, boosting prospects for second section firms, more than a third of which cater to consumers.

“When these neglected stocks in the second section start to move, they keep going,” said Hiroyuki Uekusa, general manager of trading at Meiji Yasuda Asset Management Co. “Japanese stocks have lagged behind other global markets, and stocks on the second section of the Tokyo Stock Exchange have lagged the most.”

The MSCI All Country World Index (MXWD) has risen about 83 percent since March 2009, when global equity markets bottomed after the collapse of Lehman Brothers Holdings Inc. The Topix Index, Japan’s broadest equities gauge, has gained 18 percent. The record rally has taken the advance of the second-section measure to 32 percent.

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