Tokyo pharma stocks - week to December 10

Tokyo saw a modest rally in the week ended December 10, but there was alack of energy due to crosscurrents of positive and negative news developments. The Nikkei 225 rose 1.9%, while the Topix index inched down 0.6%. The market was upset mid-week by the news that a leading contractor, Aoki Corp, went bankrupt as banks urged the clearance of bad loans. However, the news later on was perceived positively by the market, signifying that Japanese structural reforms, including the elimination of financial institutions' non-performing loans, are progressing smoothly.

The strength of US technology stocks supported Tokyo, and the market favored government statistics which indicated that second-quarter, fiscal year 2002 corporate capital spending managed to edge up 0.5% year-on-year, the first rise in one-and-a-half years. However, market sentiment cooled off with the report that Japan's real Gross Domestic Product during July-September fell an annualized 2.2% from the previous quarter, posting minus figures for two consecutive quarters.

The pharmaceutical index lost 2.3%, underperforming the market. The final decisions on the drug reimbursement price cuts scheduled for April 2002 are still being awaited, causing market players to remain prudent in investing new funds into pharmaceutical stocks, although select drug stocks managed to rise.