By Brigid Riley
TOKYO (Reuters) -Japan's main stock benchmark breached 40,000 points for the first time to end Monday at a record closing high, as corporate governance reform and solid valuations continue to pave the way for long-term global investor interest.
As technology shares jumped, tracking their U.S. counterparts, the Nikkei share average finished the day up 0.5% at 40,109.23.
After five consecutive weeks of gains, the index smashed through the fresh intraday peak of 39,990.23 hit on Friday and rose as high as 40,314.64 before momentum eased in the afternoon session.
While there may be short-term moves as the market heats up, "I think the market will continue to rise," said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui (NYSE:SMFG) DS Asset Management.
Overseas investors have been leading the buying, and many seem to be investing from a medium- to long-term perspective, he said.
Some analysts estimate Japanese equities could rise further this year on the back of long-term changes in company behaviour, with one forecast calling for as high as 43,000 points, according to a Reuters poll published on Feb. 22. The median 2024 year-end forecast for the Nikkei was 39,000.
While foreign interest has helped to fuel the Nikkei's rapid rise, some see the continued rally as a gradual turning point for domestic retail investors, who have largely given Japan's stocks the cold shoulder.
Purchases of Japan-focused exchange-traded funds that qualify for local tax breaks have surged lately, said Wei Li, portfolio manager at BNP Paribas (OTC:BNPQY) Asset Management.
"The strong performance of the Japanese market compared to global peers is expected to encourage individual investors to allocate more to their home market over time."
On Monday, Japanese tech shares got a kick from the ongoing artificial intelligence rally in U.S. stocks that saw the S&P 500 and Nasdaq to record highs on Friday.
Chip-testing equipment maker Advantest, which counts U.S. artificial intelligence firm Nvidia (NASDAQ:NVDA) among its customers, was up 3.7%. Chip-making equipment giant Tokyo Electron gained 2.4%.
The shares in those two companies added a combined 160 index points to the Nikkei's 198-point rise.
Japan-based semiconductor manufacturer Renesas Electronics came out the top performer of the day, up 4.9%.
JSR Corp, a major maker of photoresists used in chipmaking, jumped 4.8% after a media report that state-backed fund Japan Investment Corp (JIC) plans to launch a tender offer for the shares this month.
The broader Topix ended down 0.1% at 2,706.28.