A panoramic view of the city’s skyline as people stand on an observation deck in Roppongi Hills, Tokyo, to watch the full moon on September 21, 2021. (Photo: Philip FONG/AFP) (Photo: PHILIP FONG/AFP via Getty Images)
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Japan’s Topix hit its highest point since August 1990, suggesting foreign investors are returning.
The Tokyo Price Index, also known as the Topix, has risen more than 6 percent so far this year. The broad-based index, made up of around 2,000 constituents, has outperformed its regional peers in the Asia-Pacific region.
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The Topix gained 0.6% on Tuesday and extended gains on Wednesday, led by gains in utilities, consumer cyclicals, technology and financials.shares tokyo electron, Oriental Oasis, softbank group, sony and nintendo It was one of the biggest gainers on Wednesday morning.
“Foreign investors are back – which speaks to the nature of the recovery in Japanese equities,” Societe Generale Asia equity strategists Frank Benzimra and Tsutomu Saito said in a note on Tuesday.
“This is a shorter-duration trade than a broad-based turnaround based on fundamentals, strong domestic demand, and more generous distribution policies (accelerated share buybacks),” he wrote.
Foreign investors bought a net 2.1 trillion yen ($15.4 billion) worth of Japanese stocks in April, the firm noted, adding that the Japanese corporate sector remained the largest net buyer of Japanese equities, with year-to-date purchases of . 1.1 trillion yen.
The Nikkei 225 also rose to its highest level since November 2021, led by gains in industrial stocks, including Seiko, Mitsubishi Materialsand Japanese plate glass. The index breached the psychological level of 30,000 on Wednesday morning.
Maintain an overweight position in Japanese equities, unhedged, with a bias toward banks, financials and value…
Shares in Japan’s top five trading houses rallied earlier this year after Berkshire Hathaway Chairman and Chief Executive Warren Buffett increased his stakes in the companies and hinted he may increase further.
Monex Group’s Jesper Koll told CNBC that Buffett’s recent trip to Japan to meet with trading firms was considered a “seal of approval” for investing in Japan.
Central Bank Concern
Societe Generale strategists added that their overweight position in Japanese equities remained unchanged.
They expect the central bank to widen its yield curve control to 100 basis points above and below its target 10-Year Japanese Government Bonds 0% of.
In our view, the main risks to our bullish view on Japanese equities come from overseas factors such as US debt ceiling issues, recession risks and geopolitical risks.
Legislation
Goldman Sachs
Such a move would be “positive for the yen, but not automatically bearish for stocks, as the yen remains deeply undervalued,” the strategists wrote, adding that the corporate sector would have a competitive advantage in widening the YCC range.
The Bank of Japan shocked bond markets in December by widening the rate band to 50 basis points from 25 basis points.
this yen It traded slightly lower against the dollar at 136.43 on Wednesday.
At Kazuo Ueda’s first meeting as central bank governor, the Bank of Japan left unchanged its monetary policy while announcing an early policy review.
Strategists at Societe Generale said the Bank of Japan’s monetary policy change is likely to be a “very gradual process, and the YCC (yield curve control) policy and rate hike expectations will not be removed in the next two years.”
“Keep an overweight position in Japanese equities, unhedged, with a bias towards banks, financials and value,” they wrote.
more room to go
Goldman Sachs said in a May 12 note that the investment bank sees “many reasons” to support its bullish stance on Japanese stocks.
“Specifically, we note solid fundamentals compared to equities in overseas markets, and we also think expectations for structural changes/reforms may further fuel gains in Japanese equities,” wrote Japanese equity strategist Kazunori Tatebe.
He pointed to the possibility of structural reforms ahead, adding: “We believe the main risks to our bullish view on Japanese equities come from overseas factors such as the U.S. debt ceiling issue, recession risk and geopolitical risk.”
– CNBC’s Lim Hui Jie contributed to this report.