Biotech-Heavy ‘Nasdaq of Japan’ Is Asia’s Best-Performing Index

(Bloomberg) -- Japan's Mothers Index recovered to the 1,000 point milestone for the first time since December 2018 as the coronavirus pandemic became an unexpected tailwind for the startup board.

The index is up 27% in the past month, the most of any equity gauge in Asia. A surge in shares of AnGes Inc. on the back of hopes for its coronavirus vaccine candidate is among the reasons -- but far from the only one. The outbreak has been an unexpected boon for shares in many of the larger firms on the board, including flea market app operator Mercari Inc. and drug maker Sosei Group. Several companies that listed just in December, including cloud accounting firm Freee KK and telemedicine provider Medley Inc., have also benefited as the virus changes work and lifestyle habits in Japan.

“Normally it's just a few distinct themes on the index that are moving,” said Yasuo Sakuma, president of Libra Investments, “but now it's a whole range, from biotechnology to online to AI.” While many Topix companies are expected to make a slow recovery, he sees Mothers, with many companies focused on new services, as “highly likely to see a V-shaped recovery.”

The index is often considered the “Nasdaq of Japan,” having been formed in 1999 to capture the dot-com-era startup mania. Healthcare stocks, including biotechnology companies, now make up 32% of the index, while IT firms are at 27% -- a stark contrast to the large manufacturer-heavy Nikkei or Topix indexes.

“Three-quarters of the companies on the index are growth industries such as biotech or IT,” said Hideyuki Ishiguro, a senior strategist at Daiwa Securities. “Unlike manufacturers, Mothers firms have either not been negatively impacted by the pandemic, or are actually actively involved in changing the times, such as drug or vaccine makers.”

“This is the kind of market that only happens once every few years,” said Sakuma. “1,000 points is a mere stop along the way. In the mid-term, it can hit the the 2018 high” of the 1,300 point mark, he said.

Mothers has also benefited from its accessibility for retail investors, with some pointing to concerns that its two-month almost non-stop gain may be a short-term craze. “With the surge in people working from home, there are a lot of day traders in the forex markets,” said Masashi Samizo, a market analyst at SMBC Trust Bank. “It's likely small- and mid-caps, like those on Mothers, are seeing similar moves.”