The Nikkei 225 Index surged by over 3.5% today, May 21, its best day in weeks, helped by numerous catalysts, including the potential US-Iran deal, foreign buying of Japanese stocks, and the soaring Softbank stock. It jumped to ¥61,940, higher than this week’s low of ¥59,460.
Nikkei 225 Index is rising amid a soaring Softbank stock surge
One of the main catalysts for the soaring Nikkei 225 Index is Softbank, which jumped by over 20%, its best single-day performance in weeks. This surge happened after OpenAI, the parent company of ChatGPT, revealed that it was going public soon.
The IPO will be an important period for Softbank, which has borrowed heavily to invest in the company. Precisely, it borrowed $60 billion to invest in it, making it one of the biggest shareholders. Most recently, its AI bets helped to fuel a $46 billion jump in Vision Fund profits.
OpenAI was recently valued at over $800 billion in its IPO, and with demand for AI companies soaring, there is a likelihood that it will get to a $1 trillion valuation soon.
The challenge, however, is that its growth has slowed in the past few months as many customers have moved to Anthropic’s Claude. As a result, there is a risk that the stock will drop after going public, which may reduce Softbank’s potential return.
Softbank stock is also soaring because of the upcoming SB Energy IPO in the United States. Masayoshi Son’s company and OpenAI have all invested in SB Energy, a company that develops large-scale power and data center projects. It is part of the Stargate project, which includes OpenAI, Oracle, Softbank, and MGX. These IPOs will help Softbank to realize its investment over time.
Foreign investors are investing in Japanese stocks
The Nikkei 225 Index is also soaring after official data showed that foreign investors were investing in Japanese stocks aggressively. They bought shares worth over ¥948 billion last month after buying ¥1.28 trillion a month earlier.
Some of these investors are taking advantage of the weaker Japanese yento scoop up Japanese companies. The yen has dropped closer to 160, a level that triggered intervention by the BoJ recently.
Meanwhile, the index is also benefiting from a statement by Donald Trump on Wednesday. He told reporters that the United States and Iran were nearing a deal to end the war. This statement fueled the US stock market rally and a sharp decline in crude oil prices.
Nikkei 225 Index technical analysis
NI225 Index chart | Source: TradingView
The daily chart shows that the index has formed a perfect bullish chart pattern. It formed a cup-and-handle pattern, a common bullish continuation sign in technical analysis.
It then made a strong bullish breakout and then retested the upper side on Wednesday. A break-and-retest pattern normally confirms a bullish outlook.
The index has remained above all moving averages. Therefore, the most likely scenario is where the index continues rising, potentially to the year-to-date high of ¥63,805. A move above that level will point to more gains, potentially to ¥64,000.
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