Trading on the Tokyo Stock Exchange today [Tuesday] saw shares in Japanese retailer Seiyu soaring, following rumours that it and its equity partner Wal-Mart will together sell discount goods from China at certain Seiyu stores.

The products will probably include casual clothing manufactured in China and other areas in Asia where Wal-Mart does business, and consumer prices will reflect Wal-Mart's massive buying power. They will be sold in specially renovated Seiyu stores, primarily in the Tokyo area. The outlets may bear the Wal-Mart name.

If the new ranges sell well, in 2004 the two companies may set up supercentres combining a large-scale discount store and a food shop.

Shares rose over 8% during early trading on rumours of the strategic shift, even though no concrete details have been released. If Wal-Mart is upping its cooperation with Seiyu, this will ease worries that the US giant is not intending to exercise its option to raise its stake in Seiyu to 33.4% by the end of this year from 6.1%.

Analysts consider it crucial that Wal-Mart exercise this option to ensure Seiyu's long-term success, and had reacted with concern to rumours that Wal-Mart was considering entering Japan with a different retailer instead of Seiyu, sending shares tumbling in early June.

But even before Sunday's report, analysts were noting that the alliance appeared to be on track, noted Reuters. "Seiyu's comprehensive alliance with US retailing giant Wal-Mart appears to be proceeding on schedule, and following the full-scale adoption of several Wal-Mart systems, we expect solid improvement in margins," West LB Panure analyst Jun Kawahara said in a report last week in which he upgraded Seiyu's rating to "outperform" from "hold".