An overhead view of town skyline as people stand on the Roppongi Hills Remark Deck to observe the total moon in Tokyo, September 21, 2021. (Photo: Philip FONG/AFP) (Photo: PHILIP FONG/AFP via Getty Images)
Philip Fong | AFP | Getty’s paintings
Japan’s Topix hit its highest level since August 1990, marking the return of foreign investors.
The Tokyo Price Index, also generally known as the Topix, has gained greater than 6% since the start of the yr. The wide-ranging index, consisting of roughly 2,000 components, outperformed its regional counterparts within the Asia-Pacific region.
Topix rose 0.6% on Tuesday and continued its gains on Wednesday, led by utilities, cyclical consumer goods, technology and finance. Actions Tokyo electron, The Land of the Orient, Softbank Group, Sony AND Nintendo they were the most effective on a wednesday morning.
“Foreign investors have returned – which says something concerning the nature of Japan’s stock market recovery,” Societe Generale equity strategists Frank Benzimra and Tsutomu Saito wrote in a Tuesday note.
“It’s less [of] long-term trade fairly than broad-based growth based on fundamentals, strong domestic demand and a more generous distribution policy (acceleration of share buybacks),” he wrote.
The corporate noted that foreign investors bought 2.1 trillion yen ($15.4 billion) net value of Japanese shares in April – adding that Japan’s corporate sector stays the most important net buyer of Japanese shares, with a volume of 1.1 trillion yen since starting of the yr.
The Nikkei 225 also rose to its highest level since November 2021, also led by industry names including NSK, Mitsubishi materialsAND Nippon glass. On Wednesday morning, the index passed the psychological level of 30,000.
Hold an chubby position in Japanese equities, unsecured and focused on Banking, Finance and Value…
Earlier this yr, shares in Japan’s five largest malls saw their prices rise after Berkshire Hathaway chairman and CEO Warren Buffett raised his stake in the businesses and suggested he might increase his holdings even further.
Monex Group’s Jesper Koll told CNBC that Buffett’s recent trip to Japan to fulfill with trading firms was hailed as a “seal of approval” for investing in Japan.
Central bank focus
Societe Generale strategists added that their chubby position in Japanese equities remained unchanged.
They expect the central bank to increase the yield curve control band to 100 basis points above and below the goal 10-year Japanese government bonds 0%.
We imagine the most important risks to our optimistic outlook on Japanese equities stem from foreign aspects resembling the US debt ceiling issue, recessionary risks and geopolitical risks.
Kazunori Tatebe
Goldman Sachs
Such a move could be “bullish for the yen, but not routinely down for stocks because the yen stays in deeply undervalued territory,” the strategists wrote, adding that the company sector would have a competitive advantage against the expansion of the YCC band.
The Bank of Japan shocked bond markets in December when it prolonged its range from 25 basis points to 50 basis points for the last time.
The Japanese yen traded at barely weaker levels to 136.43 against the dollar on Wednesday.
At Kazuo Ueda’s first meeting as central bank governor, the Bank of Japan made no changes to its monetary policy while announcing a policy review.
SocGen strategists said the Bank of Japan’s monetary policy change is prone to be “a really gradual process without eliminating the YCC” [Yield Curve Control] rate of interest hikes expected in the following two years.
“Keep an chubby position in Japanese equities, unsecured and bank, finance and value oriented,” they wrote.
Extra space to go
Goldman Sachs said in a May 12 report that the investment bank sees “many reasons” to back up its optimistic stance on Japanese equities.
“Specifically, we see solid fundamentals in comparison with overseas equities, and we imagine that structural change/reform expectations could push Japanese stocks up even further,” wrote Japanese stock strategist Kazunori Tatebe.
Noting that there may be a possibility for structural reforms, he added: “We imagine the most important risks to our optimistic outlook on Japanese equities stem from foreign aspects resembling the US debt ceiling issue, recessionary risks and geopolitical risks.”
– Lim Hui Jie of CNBC contributed to this report.