The Winners and Losers in Japan's Stock Market, and What to Watch in 2022

(Bloomberg) -- Reopening plays led gains in Japan’s equities market this year while 2020’s pandemic winners like health-care and stay-at-home stocks dropped to the bottom.

Shipping stocks topped advancers on the Nikkei 225 Stock Average, and commodities-related groups were among the best performers on the Topix. Drug and video-game makers tumbled meanwhile, and market titans SoftBank Group Corp. and Fast Retailing Co. also ranked among notable decliners.

Looking ahead to 2022, JP Morgan is bullish on automakers, saying their earnings should recover as supply-chain problems fade. The broker also likes real estate on a boost from rising domestic inflation, while it sees a capex recovery benefiting machinery and IT services, strategists including Ryota Sakagami wrote in a Nov. 30 report.

SMBC Nikko says reduced stagflation worry, U.S. rate hikes and Chinese policy easing should help drive gains in Japan’s value and economically sensitive stocks from February. “We see a strong likelihood that Japanese stocks outperform the global market in 2022,” strategist Masashi Akutsu wrote in a Dec. 15 note.

Here’s a look at some of the most significant Japanese stock moves in 2021 (year-to-date share moves shown in brackets):

Winners

Nippon Yusen KK (+265%), Kawasaki Kisen Kaisha Ltd. (+228%), Mitsui OSK Lines Ltd. (+171%)

Japan’s three largest shipping companies were the nation’s best-performing blue chips in 2021, boosted by high container rates. Analysts expect another good year ahead amid strong demand as economies recover.

Inpex Corp. (+80%)

Reopening economies have lifted crude futures by about 50% this year, which has in turn helped shares of energy-exploration firms including Inpex. 

Nikon Corp. (+90%), Citizen Watch Co. (+69%)

A rebound in travel and tourism helped drive demand for Citizen’s watches and Nikon’s cameras, while the latter has also benefited from expectations for further growth in its chip-related business.

Fuji Electric Co. (+69%), Denso Corp. (+55%)

While Tesla Inc. may be the biggest headline generator in the electric-vehicle space, Japan has a couple of EV plays that have quietly rivaled the U.S. giant’s advance this year. Toyota Motor Corp.’s electrification push should drive sales at its largest parts affiliate Denso, while Fuji Electric is seen to have a competitive edge in EV power chips.

Losers

M3 Inc. (-41%), Chugai Pharmaceutical Co. (-32%)

Health care was hit hard as investors started to look beyond Covid-19. Last year’s biggest Nikkei winner M3 was this year’s biggest loser, as the market dialed back bullish forecasts for its online health-related businesses. Pharmaceuticals was the worst-performing Topix sector, and Chugai tumbled the most among the major drugmakers after a nearly fivefold gain over the previous four years.

SoftBank Group Corp. (-33%)

Masayoshi Son’s company is Japan’s most-direct proxy to the selloff in Chinese tech giants amid Beijing’s regulatory crackdowns. On top of the plummeting value of its investments in companies including Alibaba Group Holding Ltd. and Didi Global Inc., SoftBank was also hurt by a six-month pause in its supportive stock buybacks.

Nexon Co. (-30%)

Nexon led game makers as people returned to their offices and schools, in addition to issues with Chinese regulatory approvals. The return to more normal lifestyles was also bad news for food-delivery website operator Demae-Can Co., driving its shares down 72% to rank lowest on the Jasdaq for 2021.

Fast Retailing Co. (-29%)

The Uniqlo operator was hurt this year by sluggish business in Japan and China as well as continued coronavirus flareups globally. It also encountered consumer boycotts related to Xinjiang labor issues and a surge in cotton prices.

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