Subject: Japan's Stocks Are Surging On Rumors, Cheerleading
Date: Published: 9/4/92 (75 lines)
Source: Wall Street Journal. Copyright Dow Jones & Co. Inc.

    Japan's Stocks Are Surging
    On Rumors, Cheerleading
    ----
    By Quentin Hardy
    Staff Reporter of The Wall Street Journal

    TOKYO -- What is it exactly that's propelling the Tokyo stock
 market?
    Since hitting a six-year low Aug. 18, the Nikkei index has
 rocketed a stunning 28.5%, or 4077 points, including a jump of
 798.77 points Thursday to 18386.49.  It continued to rise Friday
 morning.
    Have investment fundamentals changed so sharply that they justify
 so rapid a climb?  Don't bet on it.
    In the past week, the Nikkei has been fueled by often-groundless
 rumors -- about milk companies' hitting it big on AIDS-drug
 research, about supposed new technologies for ceramic auto engines,
 about Japan's hosting the 1998 Olympics.  The market also has gotten
 a boost from some old-style cheerleading and arm-twisting by the
 government.  Traders here are convinced that the bureaucracy is
 urging brokers and companies to buy stocks in hopes of preventing a
 recurrence of the market plunge that marked most of the summer.
    The people on the trading floor hail all this as bullish in the
 short term.  But watch out, they say, for the day when true market
 forces reassert themselves and overwhelm the wishful thinking.  In
 fact, amid all the hype and hoopla of the past two weeks, Japan's
 corporations continued to announce generally dismal earnings.  And
 the indexes tracking small Japanese companies fell Thursday, despite
 the Nikkei's big rise.
    "What this is all about is Japan Inc. trying to break people's
 bear market attitude," says Hugh Simon, president of Hamon
 Investment Partners in Hong Kong.  "You're betting against the system
 in Japan if you sell now."  But don't take that as a "buy"
 recommendation, he adds.  "Would I be a fundamental investor in Japan
 at these levels?  No."
    To get an idea of the speculative nature of this market, consider
 some of the most powerful stocks over the past several sessions:
 AIDS-related milk stocks.  These dairy companies, which have modest
 biotechnology research arms, are being promoted by retail brokers
 and Japan's financial press as hot speculative plays.  The sales
 target:  retail customers, who appear to have regained confidence in
 the market following the government's announcement last week of a
 10.7 trillion-yen ($86.96 billion) economic stimulus package.
    Meiji Milk Products Co., which rose 20 yen to 1150 yen a share
 Thursday, made up 11.8 million of the 500 million shares traded on
 the 1,223 -- any Tokyo Stock Exchange.  Measured by volume times
 price, it was Thursday's best-performing stock.
    And what treatment has the milk producer devised for acquired
 immune deficiency syndrome?  "We have no idea if we can even come up
 with a drug," says company spokesman Norio Shigenari.  Meiji Milk, he
 claims, has discovered a substance that appears to kill the AIDS
 virus, but the company's research staff hasn't yet finished lab
 tests, and is nowhere near a clinical trial.
    Morinaga Milk Industry Co. says it has an AIDS-drug research
 tie-up with a U. S. concern and says it is advancing toward clinical
 trials.  But, adds a spokesman, "we're looking at a long future"
 development.  Morinaga closed at 614 yen a share Thursday, up 69 yen
 on volume of 3.7 million shares.
    Aside from the milk makers, candy company Meiji Seika Co. is also
 a popular AIDS-treatment stock.  On Thursday it rose 40 yen, to 790
 yen, on volume of 10 million shares.  "The newspapers speculated that
 something we produce is good for AIDS," a company spokesman said.
 "We don't think so.  We don't have anything related to AIDS."
    Japanese brokerage houses often buy the AIDS-play stocks, hoping
 to resell them to retail customers titillated by newspaper reports
 recounting the supposed discoveries.  Big-time speculators also like
 AIDS stocks because their volatility can produce a quick return.

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