By Hideyuki Sano
TOKYO, May 21 (Reuters) - Japan's Nikkei share average snapped a four-day winning streak on Thursday, as investors were reluctant to chase markets after the benchmark hit a 2-1/2-month high, raising concerns that stocks were potentially overvalued.
The Nikkei share average .N225 closed 0.21% lower at 20,552.31. Earlier in the session, the index rose to as high as 20,734.91, its strongest level since March 6. The broader Topix .TOPX lost 0.23% to 1,491.21.
Although the market has rallied on hopes of a quick economic recovery following countries' move to ease coronavirus restrictions, investors have noted the market's valuations are getting stretched.
The Nikkei has rallied 8.6% so far this quarter after suffering a 20% loss in the previous quarter on worries about severe economic damages from the COVID-19 pandemic.
The Topix is traded at 14 times its expected earnings, sharply higher than the trough of 10.6 touched in March and near last year's peak of 14.4.
The turnover of the Tokyo Stock Exchange's main board has fallen below 2 trillion yen to the lowest level in almost a month, another sign of a lack in strong convictions among investors to chase the market higher.
The Japanese government is expected to lift its state of emergency later in the day in three prefectures around Osaka, the country's second-biggest urban area after Tokyo, and might take similar steps for Tokyo by the end of month. more people are expected to work from home even after the end of emergency, railway companies are expected to lose revenue from commuting and business travels, while cosmetic companies are bracing for a drop in sales.
Cosmetic maker Shiseido 4911.T slumps 1.8%.
"Trading on winners and losers from the coronavirus will be our main course of actions," said Hisashi Iwama, fund manager at Asset Management One.
"Even though some shares now look bubbly, this polarisation could continue further for the time being.
On the other side of the spectrum, I'rom Group 2372.T rose 21.1% by the daily limit after the bio-tech firm said its coronavirus vaccine development project won a backing from a public research body.
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