The Nikkei Stock Average rose 236 yen to 59,585 on the 22nd, marking its third consecutive day of gains and setting a new all-time high by surpassing the previous record set on April 16. Despite headwinds from European markets closing broadly lower and US stocks continuing to decline across the Dow Jones, Nasdaq Composite, and S&P 500, the market recovered from morning weakness. However, the session was characterized by uncertainty, with the index briefly dipping into negative territory in the afternoon. Notably, declining stocks numbered around 1,300, accounting for 83% of Prime Market listings. While SoftBank Group <9984> and ADVANTEST CORPORATION <6857> drove the Nikkei's movement, the broader market sentiment remained heavy, as the TOPIX declined 25 points.

Earnings announcements will begin in earnest after Golden Week, though companies face challenges in providing guidance for the fiscal year ending March 2027. While it is highly probable the Bank of Japan will refrain from raising rates at its monetary policy meeting on April 27-28, Governor Kazuo Ueda faces a difficult balancing act in addressing the yen's depreciation. With a June rate hike still on the table and downward pressure on corporate earnings being recognized, the outlook for a sustained rally in record territory remains uncertain, forcing investors to focus on individual stock selection.

A new trend is emerging in defense-related stocks following the government's April 21 abolition of the "five categories" that restricted defense equipment exports. Defense Minister Shinjiro Koizumi has signaled that domestic drone production and dual-use technology are essential. Traditionally, defense themes were limited to small-cap names such as Ishikawa Seisakusho <6208>, Howa Machinery <6203>, and HOSOYA PYRO-ENGINEERING <4274>. The symbolic "real defense" stock, Mitsubishi Heavy Industries <7011>, was often excluded from aggressive recommendations. The policy shift represents an epoch-making event in postwar security, reflecting the Sanae Takaichi administration's commitment to national defense.

Despite the policy shift, Mitsubishi Heavy Industries has shown upside resistance. This may reflect a capital shift by institutional investors toward AI and semiconductor-related stocks. High margin buying balances for Mitsubishi Heavy Industries accumulated during its mid-April decline have also hindered its recovery. However, both 13-week and 26-week moving averages maintain upward trends, and the stock is currently holding firm near the 26-week line. For longer-term investors, the current price level may represent an accumulation zone.

In the defense sector, investors are favoring small and mid-cap stocks in the three-digit price range, such as VALUENEX Japan <4422>. SOLXYZ <4284> is also attracting attention; through a subsidiary, it provides edge device systems for defense and space, with potential for drone control demand. The company projects record-high sales and operating profit of 1,600 million yen for the fiscal year ending December 2026. SHIFT <3697> is also expanding in defense through cybersecurity compliance support, while RIKEI <8226> remains a contender with its VR flight simulators for the Self-Defense Forces and drone technology.

SIGMA KOKI <7713>, though not in the three-digit price range, warrants attention for its expertise in defense-related lasers and optical components. The company captures demand in surveillance and measurement applications. With the stock on the verge of breaking through its daily Ichimoku cloud, it remains a key name for watchlists.

Tomorrow's schedule includes the release of weekly cross-border securities transactions, March nationwide supermarket sales, and the April Monthly Economic Report. Inuneko Seikatsu <556A> will list on the TSE Growth Market. Earnings are expected from SHIMANO <7309> and CANON <7751>. Internationally, markets will focus on South Korea’s Q1 GDP, the Philippine central bank policy rate, and April flash PMIs for the Eurozone, UK, Germany, France, and the US. SK Hynix is also scheduled to report first-quarter results.

*This report may contain unconfirmed information. Stock trading decisions are made at your own risk and judgment.

Source: MINKABU PRESS

*Translated by generative AI. Click here for the original article.