In 2006...Japanese tech stocks will be hot, hot, hot

Japan's stockmarket is back in vogue and the country is proving as adept as ever at creating hi-tech gadgets that we want to buy. Pelham Smithers of Kensington Research reveals five Japanese tech stocks that should do well in the year ahead.

By MoneyWeek

published 10 January 2006

in Features

The future is an impossible place. Every year the world's financial pundits have a go at forecasting it and pretty much every year they are wrong. Indeed, if they had any sense they'd have given up long ago. Still, they haven't, and no one appears to mind much if they keep getting it wrong the financial commentary market seems to be a remarkably forgiving place. With this in mind, we've asked some of our writers and some of our favourite analysts to tell us what they think might happen during 2006...

The Japanese stockmarket is back in vogue and the country is proving as adept as ever at creating products that we, or as often as not our children, want to buy, writes Pelham Smithers, something that makes technology shares a good place to be, just as it was in 2005. Then, Toyota's shares did well on the hybrid car theme, Murata's stock rose on the increased use of Bluetooth-enabled mobile phones, Matsushita's did well on the flat screen TV boom, and Toshiba's rose on strong sales of the flash memory chips that drive everything from your digital camera to your iPod Nano. So what will be the themes that will make money in 2006? Here are five key stories of 2006 and what could be the best plays on them.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Nintendo's "Revolution" game console (right) may well appear on the market after Microsoft's Xbox360 and Sony's PlayStation3, but it will still be talked about because of its new controller, which is able to replicate on the TV screen the movements it makes in your hand. If you wave it like a tennis racquet, you will see a similar move made by your virtual reality counterpart on the TV. This could be the big hit for Christmas 2006. That, though, is only the start: Nintendo's magic wand or similar-type products may well end up replacing the PC mouse and changing the way we all interact, with not only computers, but all our electric equipment.

On 22 June, Japan will play Brazil in the World Cup. The kick off is 8pm in Germany, which will make it 3am in Japan. Time to set the video recorder. However, this might well be no ordinary video recorder, since if you are Japanese, you might well have bought one of the new high-definition video recorders to go with your high-definition LCD TV. The World Cup in Germany is likely to boost sales of flat screen TVs world wide, but in Japan it should also encourage the sales of high-definition video recording equipment. In what is billed as a repeat of the VHS/Betamax wars, there are two rival systems: Sony's BluRay and Toshiba's HD-DVD. While there are merits to both systems, the current betting is that BluRay will win, since it will be included in the PlayStation 3, giving it a huge head start.

In 2006, there will be two new ways to rent videos. One will be using self-destructing DVDs, which last no more than 24 hours after being opened. This will enable stores to offer rentals without the hassle of a deposit. However, more exciting is video rental download to your set-top box. This way, you won't even have to go out to rent a video. Culture Convenience Club is one of Japan's leading video rental clubs.

Downloaded video rental is only going to be commercial if download speeds are sufficiently high. Since the start of 2005, NTT has embarked on a programme to digitally cable 50% of Japanese households by 2010. At 100Mbps, digital cable download speeds make movie downloads possible. The company entrusted with much of the cabling work is Comsys, a company so busy that it is having to bus employees in to Tokyo from all over the country to meet demand.

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.