Nikkei surges 2.7% as electronics, bank stocks rally on US tech gains

Japan's benchmark index rebounded as investors piled into electronics and banking shares after a strong session on Wall Street.

The Nikkei 225 rose 2.7% in early trade Wednesday, led by electronics and banking stocks after gains in US technology shares overnight lifted risk appetite across Asian markets.

"The move reflects a rotation back into Japanese equities after recent volatility, with the overnight rally in US tech names providing a clear catalyst for buying," said Kieron Poon, investment director of Asian equities at Aberdeen Investments.

Electronics stocks led the advance, with semiconductor-related names rebounding after a sharp selloff earlier in the week that erased about $1.3 trillion from the world's largest chip stocks. Banking shares also gained, supported by expectations that higher Japanese interest rates could improve lending margins. The broader Topix index traded higher, tracking the Nikkei's upward momentum.

The rally comes after a turbulent period for Japanese equities, which had been caught up in a global semiconductor rout. The Philadelphia Semiconductor Index fell nearly 20% over the past month before stabilizing this week, as investors reassessed valuations in AI-linked chip stocks that had surged more than 90% over the prior 12 months.

"The recent pullback in AI-related chip stocks reflects investors giving back a little bit of the froth that was in the AI market," David Riedel, founder and president of Riedel Research Group, told CNBC. He added that memory chipmakers "will be fine" but needed to "give back some of those sudden gains."

The Nikkei's bounce suggests investors are distinguishing between the correction in overvalued semiconductor names and the broader recovery story in Japanese equities, where corporate governance reforms and a weaker yen have drawn foreign inflows. The yen traded near 153 against the dollar, providing additional support for export-oriented electronics and auto stocks.

This article is for informational purposes only and does not constitute investment advice.