Tokyo's stock market on the 1st, marking the start of April trading both in name and reality, saw a dramatic shift from previous sessions, with the Nikkei Stock Average surging \2,675 to \53,739, its first sharp rebound in five trading days. This was not only the largest gain of the year but also ranked fourth in history, closing at the day's high with a record-breaking performance. Looking at individual stocks, advancing issues on the Prime Market exceeded 97%. Such figures would be unlikely without the activation of AI-driven automated trading programs.

Views on the Middle East situation have tilted in an optimistic direction, triggering an unwinding of recent risk-off positions. While the tide had already turned during European trading hours the previous day, stock markets in European countries showed only limited gains. However, in the U.S. market, major indices accelerated their climb in the latter half of trading, with the Dow Jones Industrial Average landing in the upper range with a gain of 1,125 points. The NASDAQ Composite Index also closed 795 points higher, significantly outpacing the Dow in percentage terms. News that "President Trump mentioned ending military attacks on Iran without waiting for the reopening of the Strait of Hormuz" emerged the previous day, but the market remained skeptical at that point. However, when subsequent headlines reported that Iran's president was prepared to end the war, investment money flooded into the market like a bursting dam. Until then, regardless of Trump's statements on ceasefire, Iran had flatly denied even that negotiations had taken place, but the market judged that the situation had changed significantly at this juncture. Tokyo's market today rode this same wave.

In the Tokyo market, during the correction phase triggered by the recent Middle East crisis, strategic short positions known as "pure shorts" accounted for a small proportion, while deteriorating supply-demand conditions due to record margin buying balances loomed in the background. However, in the latest data as of Friday, March 27, margin buying balances (combined Tokyo and Nagoya exchanges) decreased by approximately \360 billion for the first time in four weeks to \5.4419 trillion, while margin selling balances surged significantly by \520 billion to \1.542 trillion. Roughly speaking, selling balances increased 1.5 times. Signs of short sellers running rampant began to emerge.

Then, trading on Monday, March 30, coincided with the ex-rights date for March, but the market was so dominated by selling that there was no need to mention dividend ex-rights. It was a session that directly reflected short sellers' expectations. The previous day also saw wild swings before ultimately closing down about \800 amid risk-aversion sentiment, but for short sellers, this would have been the opportunity to cover. As mentioned earlier, AI trading likely had a significant impact, but the current market is rotating stages at a speed that leaves no time for investor sentiment to waver.

Today saw 137 stocks hit new highs (year-to-date highs): 84 on the Prime Market alone, 40 on the Standard Market, and 13 on the Growth Market. This is the first time the number of stocks hitting new highs has reached triple digits since March 3, about a month ago. In that sense, one could say the curse of Hormuz has been lifted, but today's torrential rebound does not guarantee a sustained recovery rally. Moreover, even if a ceasefire is achieved in the Middle East as widely expected, this will not change the environment surrounding the market overnight. It is necessary to monitor not only crude oil price movements but also whether the upward trend in long-term interest rates globally will be halted. The initial phase of a rebound sees broad-based gains, with all holders uniformly benefiting, but the challenge comes after short covering runs its course, with strong and weak stocks gradually becoming differentiated.

From the perspective of finding strong stocks, there is a high probability that high-performance candidates are hidden among stocks that updated year-to-date highs today. To name a few candidates: first, FUJIKURA KASEI CO,.LTD. <4620>. The company has global competitiveness in resin-based coating materials and also handles electronic materials such as conductive resin materials. Fujikura Ltd. <5803>, a cornerstone stock of AI data center-related names, is its largest shareholder. Additionally, NIKKISO CO.,LTD. <6376>, a leading company in chemical pumps, Fujibo Holdings, Inc. <3104>, which handles polishing materials for semiconductor processing, and ASAHI INTECC CO.,LTD. <7747>, which handles medical guide wires and catheters, are worth monitoring on pullbacks. Furthermore, while rising food prices are troublesome for consumers, they represent a tailwind for food manufacturers in a sector less susceptible to purchase deferrals. NH Foods Ltd. <2282> and MEITO CO.,LTD. <2207> could be among such targets. Beyond other personal consumption-related names, Mercari, Inc. <4385> also shows a favorable chart.

Tomorrow's schedule includes the release of March monetary base figures and weekly cross-border securities transactions, both to be disclosed before the market opens, with a 10-year government bond auction scheduled during morning trading hours. During afternoon trading, February fiscal fund transfers to the private sector will be announced. For individual companies, Kasumigaseki Capital Co.,Ltd. <3498> will announce its interim results for the fiscal year ending August 2026 (September 2025 to February 2026), and Uniqlo's March same-store sales in Japan will be disclosed. Additionally, one IPO is scheduled for this day, with Vitabrid Japan listing on the TSE Growth Market. Overseas, weekly U.S. initial jobless claims and February U.S. trade balance will be in focus. Note that the Philippine and Israeli markets will be closed.

Source: MINKABU PRESS