Manias, Pokemon and crashes

Pokemon tempts market into playing familiar games

Pokemon GO has lured stock market investors into playing familiar games. Nintendo stock has almost doubled thanks to the runaway success of the augmented reality game. Shares have also soared in smaller firms offering Pokemon bread, burgers, cartoons and arcades. With Nintendo now retreating, this looks like a classic case of investors piling into a good story and markets overshooting.

As of late morning on July 20 in Tokyo, Nintendo shares had fallen about 13 per cent, slashing their gains since Pokemon GO's launch a fortnight earlier to a mere 92 per cent. Even so, that still translates to an extra $17.7 billion of market value, though that figure is inflated by Nintendo's roughly 15 per cent holding of treasury stock.

Meanwhile, McDonald's local unit, reportedly a partner for the Japanese launch of the game, is up 19 per cent in the same period. First Baking, the baker of "Pokemon Bread", has run up 21 per cent. Sanoyas, a shipbuilder whose theme park arm runs the "Pokemon Expo Gym", has leapt 242 per cent. Imagica Robot Holdings, which recently bought Pokemon anime studio OLM, has risen 74 per cent.

There is a case for dramatically reassessing the value of Nintendo if it can thrive in mobile gaming. But moves this sharp, and trading this frenzied - on July 19 Reuters reported that Nintendo was making up a quarter of all trading on Tokyo's main board - cannot be based entirely on fundamentals. The heady gains for Imagica and Sanoyas suggest retail investors are just desperate for another way to punt on Pokemon.

Compared to, say, the wild and immature Chinese markets, you might expect Japan's ageing population and moribund economy to make the country less susceptible to the lures of "concept stocks". But of course, in the late 1980s Japan hosted one of history's most epic bubbles, with the benchmark Nikkei 225 index trebling in four years, and an accompanying frenzy for property and art. In comparison, the Pokemon craze is a pocket-sized bubble.