(July 9): While Japan’s broad Topix index reclaimed its historic high on Thursday, a large build-up of margin buying positions by individual traders is looming as a potential headwind for semiconductor makers, power companies and some growth stocks.

Outstanding margin buying positions are near an 18-year peak, despite a small reduction in data published last week, and this has the potential to slow gains on the Nikkei 225 Stock Average, a narrower gauge which includes many of Japan’s big tech firms and growth stocks. 

Chipmakers have been at the centre of an artificial intelligence (AI)-inspired buying boom that is vulnerable to a degree of unwinding. Margin buying in Tokyo Electron Ltd, a manufacturer of chip-making machinery that’s Japan’s biggest in that sector, rose by ¥47 billion (US$293 million or RM1.38 billion) since the end of last year, the biggest increase among companies on the Topix 500 Index.

Many chip stocks, including Tokyo Electron, have turned listless after hitting highs in March and April, which has also seen the Nikkei underperform the Topix since then. 

“Chip-related shares have been capped,” said Jun Kitazawa, the deputy general manager of investment information of Miki Securities Co. “Unwinding of margin position may be weighing on them.” 

The impact of margin positions may be even bigger for some power company shares, which were also briefly boosted by bets on increased demand for electricity for chipmaking and data centres related to AI.

Tokyo Electric Power Co saw the eighth largest increase in margin buy positions by value on Topix 500 so far this year. Long margin positions in Hokkaido Electric Power Co now amount to 1.8% of its total market capitalisation, following a surge in April.

Shift Inc, a favoured information technology services stock for some investors, saw a sharp increase in margin buying as its share price kept falling, suggesting a further drop may force loss-cutting selling.

Other companies that margin investors increased their bets on include chip-related stocks such as Lasertec Corp, Disco Corp, Screen Holdings Co, Mitsubishi Heavy Industries Ltd and Hitachi Ltd.

Uploaded by Isabelle Francis