Early this week Nikkei, Japan’s share benchmark, rebounded strongly on optimism that the Tokyo Olympics will not be cancelled after the International Olympic Committee (IOC) flagged the possibility of a postponement of the Games for the first time.
The prospect of a postponement rather than cancellation of the Toyko Games due to start in July helped Japanese shares buck the global trend. Markets in the region plummeted on Monday, on recession fears as an increasing number of countries around the world adopted draconian measures to contain the spreading coronavirus.
Hopes of the Bank of Japan buying Exchanged Traded Funds (ETFs) more aggressively and public pension funds rebalancing their stock portfolio following recent sell-offs also lent support to the market.
The Nikkei average gained 2.0% to 16,887.78, off a 3-1/2-year low of 16,378.94 touched last Tuesday.
However, overall sentiment remained fragile as U.S. stock futures and Asian shares sank as a rising tide of national lockdowns threatened to overwhelm policymakers’ frantic efforts to cushion what is likely to be a deep global recession.
The Nikkei’s volatility index, a measure of investors’ volatility expectations based on option pricing and considered to be a fear gauge, dropped 6.0% to 54.97, but was not too far from a nine-year peak of 60.86 hit last week.
The IOC said on Sunday that it would hold discussions, including an option of putting back the July 24 start date or even moving the Tokyo Games by a year or more, additionally saying that cancelling the event would not solve problems or help anybody.
On Monday, Shinzo Abe Japanese Prime Minister, said for the first time that the Games may need to be postponed if the event cannot be held in its “complete form” due to the pandemic.
Ad firm Dentsu Group Inc jumped 8.6% on relief after the IOC suggested it was looking to delay however, not cancel the Games. Shares of Dentsu, which is Japan’s main marketing agency for the event, had lost almost half of their value year-to-date on worries that the event could be cancelled.
Index-heavy SoftBank Group soared 18.6% to hit its daily limit and became the most-traded stock on the bourse as the tech conglomerate said it would sell up to 4.5 trillion yen ($41 billion) in assets to fund a share buyback of up to 2 trillion yen and reduce debt.
The broader Topix advanced 0.7% to 1,292.01, with four-fifths of the 33 sector sub-indexes on the Tokyo Stock Exchange ending in positive territory.
In contrast to the market’s firm tone, air transport lost 5.6% to become the worst performing sector, with ANA Holdings Inc diving 8.6%, on the back of evaporating demand amid the global coronavirus outbreak.
Another notable mover was the TSE REIT index, which slumped 16.8% in the previous session to hit a seven-year trough, bounced back by a remarkable 13.8%.
Reporting by Tomo Uetake