(Adds fund manager comments, details)
TOKYO, June 20 (Reuters) - Nintendo Co. Ltd. 7974.OS shot past Panasonic maker Matsushita (6752.T) in market value on Wednesday and closed in on Sony Corp. (6758.T) as investors watched it unseat Sony as unrivalled king of the game industry.
Nintendo's Wii has been outselling Sony's PlayStation 3 game console 3-1 in Japan and more than 2-1 in the United States so far this year, according to game magazine publisher Enterbrain and research firm NPD.
Demand for its DS handheld game players also far outstripped that for Sony's PlayStation Portable (PSP).
Nintendo shares closed up 1.4 percent at 44,500 yen, increasing its market capitalisation to 6.30 trillion yen ($51 billion).
That compares with Matsushita Electric Industrial Co. Ltd.'s 6.23 trillion yen and 6.64 trillion yen for Sony -- the world's largest and second-largest consumer electronics makers, each having sales more than eight times as big as Nintendo's.
"Nintendo is a market leader in everything it does now, which is basically the handheld as well as console gaming market. We haven't seen Nintendo being a market leader in both products for over a decade," said KBC Securities analyst Hiroshi Kamide.
Shares in Nintendo, known for such game characters as Mario, Donkey Kong and Pokemon, have been on an uptrend over the past two years, driven initially by strong sales of its DS handheld players, and recently by growing popularity of the Wii console.
Nintendo launched the Wii in November. The device features a motion-sensitive controller that allows users to direct on-screen play by swinging it like a tennis racket or wielding it like a sword, opening a new avenue of game playing.
Sony also started selling its PlayStation 3 late last year, but it has seen slow demand so far due to its high price tag and limited availability of attractive software titles.
"One thing about Nintendo is that it has killer products and they represent a big portion of its overall business, offering investors a very clear reason to buy," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
"I think Nintendo is bound to overtake Sony (in market capitalisation)."
Shares in Sony have gained 72 percent during the past two years, outperforming the benchmark Nikkei average's .N225 59 percent rise. But the performance is outshone by Nintendo shares, which jumped nearly four-fold over the same period.
Matsushita shares have put on 52 percent.
((Editing by Michael Watson; Reuters Messaging: firstname.lastname@example.org; +81-3-3432-8837; email@example.com)) Keywords: NINTENDO SONY/
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