June 1, 2020 / 8:26 AM / a month ago

RPT-Japan's "Mothers" bourse leaps as pandemic sparks hopes of digital transformation

(Repeats with no changes to text)

* Mothers index at highest since Dec 2018, outperforms main bourse

* Market has risen 90% from trough hit in March

* Virus crisis seen accelerating digital transformation

* Foreigners turn net buyers of Mothers after 7 weeks of selling

* Mothers is likely to outperform during pandemic: fund managers

By Tomo Uetake

SYDNEY, June 1 (Reuters) - Japan’s Mothers board for start-ups has seen one of its biggest booms in history as investors bet the coronavirus pandemic will lead to a digital transformation benefitting agile venture firms rather than conservative old guard companies.

The Tokyo Stock Exchange’s Mothers market hit a key 1,000-mark on Monday for the first time since December 2018. The index has risen more than 90% from a seven-year low in March compared with a 35% gain in the benchmark Nikkei average .

Fund managers say the virus crisis has helped to bring down cultural and regulatory barriers that have hindered changes at many conservative Japanese firms, such as moving to tele-working and digitalisation.

“The pandemic has forcefully accellerated Japan’s digital transformation of social infrastructure, even in the most protected sectors of medicine, education and public administration, at a speed that no one would ever have thought of,” said Shohei Iwaya, fund manager at Asset Management One.

That has been a boon for companies catering to digital ways of living and working, such as cloud signing service operator Bengo4.com and online medical service developer Medley .

“The coronavirus outbreak has fuelled demand for those online businesses and services, while global central banks’ entrepreneur-friendly stimulus also created a big tailwind,” Iwaya said.

Although the market has been traditionally dominated by domestic investors, foreign investors have joined in. They turned net buyers of Mothers’ stocks in late May after being net sellers for seven consecutive weeks, Japan Exchange Group’s data shows.

Yasuo Sakuma, chief investment officer at Libra Investments, said the rally could continue for a while as buying has not been driven only by a few companies but is more broad-based.

“History has shown that true star companies are often born in times of crisis. Unlike those that have just enjoyed easy money during a good time, we are likely to see a real winner who has stoic, and disciplined management during turbulent times.”

Editing by Hideyuki Sano and Jacqueline Wong

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