On February 22, Japan’s stock market reached new heights, with the Nikkei 225 index soaring past the 39,000 markThis monumental rise saw the index surpass its previous all-time high of approximately 38,915.87 set during the asset price bubble of December 29, 1989. By the close of trading, the Nikkei 225 boasted a remarkable increase of 2.19%, closing at 39,098.68, which marks a record high and reflects a cumulative rise of over 16.8% since the beginning of the year.

The surge in Japanese stocks can be attributed primarily to several factors, as outlined by CFRA Research in their latest report regarding future market trajectoriesForeign capital inflows, steady global and Japanese economic growth, the successful implementation of wage hikes and price increases domestically, and ongoing government policy support aimed at enterprise valuation are all contributing elementsNotably, a significant trend of Japanese households shifting from saving to investing has the potential to propel the Nikkei index beyond the psychological barrier of 40,000 points in 2024.

Meanwhile, the Chinese stock market also displayed dynamic activity

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On the same day, broker stocks experienced a notable uptick, with firms like Everbright Securities and Huachuang Securities showing significant growthThe Shanghai Composite Index was up by 1%, while the Shenzhen Component index rose by 0.6%, and the ChiNext index saw a slight increase of 0.19%. China National Offshore Oil Corporation (CNOOC) surged over 4%, achieving a historic high, alongside growth in both China Petroleum and China PetrochemicalIn Hong Kong, CNOOC's stock rose over 5%, also reaching a record high.

In a significant development for the U.S., on February 21, American tech giant Intel hosted its inaugural wafer foundry event in San Jose, CaliforniaDuring this event, U.SSecretary of Commerce Gina Raimondo emphasized the need for increased government investment in order to restore America's leading position in the semiconductor sector, suggesting the implementation of a second Chips Act

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Already, the Chips Act, signed into law by the president last August, pledges more than $52 billion in governmental subsidies for semiconductor research and production purposes.

However, Secretary Raimondo warned that one piece of legislation alone is insufficient for the U.Sto reclaim its supremacy in the semiconductor supply chainIt is imperative to diversify the supply chain and enhance domestic manufacturing capabilities, particularly for cutting-edge chips crucial for advancements in artificial intelligence.

On the topic of investment prospects, analysts forecast promising developments for Japanese stocks over the coming yearsThe latest insights from CFRA suggest that the rest of 2024 holds considerable potential for the Nikkei index as it may surpass the 40,000 markCompared to the late 1980s, the current valuation levels of Japanese stocks are deemed much more reasonable

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The profitability of Japanese companies has significantly improved, with a greater number of firms finding themselves competitive on the global stage.

As for the dynamics of investor composition, foreign institutional investors currently represent the largest shareholdings and transactions in Japan’s stock marketTheir active participation has correlated with rapid increases in stock pricesThe Bank of Japan has accumulated about 7% of the total shares over the past decade, leading CFRA analysts to conclude that there are no substantial sell-off risks anticipated in the immediate futureCorporations have also engaged in substantial share buybacks, which have been accelerated by aggressive valuation policies termed “Nikkei Estimation”. Furthermore, individual investors have consistently sold off Japanese stocks since the collapse of the asset price bubble, despite many holding significant cash reserves

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Converting these savings into investments could provide a much-needed boost to the stock market.

Long-term strategies articulated by analysts indicate that, against the backdrop of inflation, Japan is in a favorable position to leverage debt and acquire inflation-resistant assetsThis aligns with approaches taken by investment leaders like Warren BuffettHistorically, Japanese interest rate hikes have had minimal impact on the stock marketHowever, outlooks remain cautious for the short term due to potential fluctuating risksThe Japanese economy is notably responsive to external pressures, and historical data suggests a correlation between U.Srecessions and Japanese economic downturnsThus, should the U.Senter a recession, it is likely Japan would follow suit.

In addition to the observations concerning Japan, the U.Ssemiconductor industry is also undergoing significant transformation

At the recent wafer foundry event, Secretary Raimondo discussed with industry leaders, including OpenAI CEO Sam Altman, strategies for fostering global manufacturing of AI chipsRaimondo noted that discussions with other industry executives indicated an overwhelming demand for semiconductor resources in the forthcoming years.

Although over 170 companies have sought subsidies from the Chips Act since its inception in 2022, the U.SDepartment of Commerce has disbursed only three smaller amounts to dateRecently, semiconductor manufacturer GlobalFoundries was awarded the highest project funding of $1.5 billion under the Chips ActIntel, another key player in the semiconductor industry, is among the firms vying for financial assistance from the Chips ActSpeculation suggests that delays in the release of these subsidies might be hindering Intel’s plans for new construction in Ohio, which has now been postponed to 2026.

Nonetheless, negotiations are underway to potentially grant Intel more than $10 billion in subsidies, spurring optimism within the company for a forthcoming announcement regarding funding assistance