TOKYO Hedge funds have begun shorting some Japan stocks that have had huge gains in the lead up to and aftermath of Tokyo's winning bid for the 2020 Olympic Games, with mid-sized building contractor Tekken Corp (1815.T) a case in point.
Tekken on Tuesday jumped by its daily limit of 50 yen, up 26.3 percent, to 240 yen, and has doubled in value over the past month.
But the latest available data on short-selling interest showed that 77.8 percent of its stock available to be borrowed was on loan as of September6, triple the amount from September5, according to data provider Markit.
"It's all retail money chasing these stocks higher. The smarter guys are actually looking to short these but they are going to have to time the top," a senior trader at a foreign bank in Tokyo said.
"At the moment you don't want to step in front of a freight train but once things settle down people are going to short this stuff," he said, adding that foreign investors in general had not reacted to the Olympics euphoria.
Cement maker Taiheiyo Cement Corp (5233.T) has also seen short selling interest increase, with 12.5 percent of its stock that is available to be borrowed out on loan as of September 6, double the amount on September 2.
For the time being, retail demand appears to driving gains for Japanese construction firms in particular.
Taisei Corp (1801.T), which was the contractor for the National Stadium used in the 1964 Olympic games, was the most traded on the main board by turnover and rallied as much as 15.6 percent to 7-1/2 year peak of 535 yen, adding to Monday's 13.8 percent jump.
But even for Taisei, short-selling interest has nudged up.
Around 5.9 percent of its stock that is available to be borrowed was on loan as of September 6, up from 3.2 percent on Sept 2, according to Markit.
Other contractors also rose sharply on Tuesday, with Kajima Corp (1812.T), Obayashi Corp (1802.T) and Tobishima Corp (1805.T) up between 5.5 and 13 percent.
In terms of valuations, the four companies carry a 12-month forward price-to-earnings multiple of between 22.47 and 31.65, Thomson Reuters Datastream data showed, much higher than the Topix's .TOPX 13.5.
(Reporting by Dominic Lau; Editing by Edwina Gibbs)