StockTalk (6.19): The Nikkei index has reached a 33-year high recently. Will the upward trend continue?
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Japan's stock market has been gaining increasing attention from investors recently. Since April 2023, the Nikkei 225 index has been on a continuous upward trend, reaching a high of 33,018.65 points recently, breaking the 33,000-point mark for the first time in nearly 33 years.
Warren Buffett's visit to Tokyo in April, during which he spoke about buying five Japanese stocks sparked global investor interest in Japanese stocks. At Berkshire Hathaway's annual shareholder meeting last month, Buffett revealed that he was still looking for more Japanese stocks to invest in, further fueling demand for Japanese stocks. Additionally, financial institutions including Morgan Stanley, Fidelity International, and Bank of Singapore have expressed bullish views on the future performance of Japanese stocks. Some analysts have pointed out that global funds are flowing into the Japanese stock market due to its safe-haven status. Other analysts have noted that while major central banks around the world are steadily raising interest rates, the Bank of Japan is still maintaining loose monetary policy, driving up the Japanese stock market.
However, the question remains whether the upward trend in Japanese stocks is sustainable. On Friday, June 16, the Bank of Japan announced that it would maintain its short-term interest rate target at minus 0.1% and keep the 10-year bond yield at zero. Japan's job market has seen significant growth in local employment numbers compared to 10 years ago, and wages have finally achieved modest growth after years of stagnation. In terms of prices, core inflation has been above the Bank of Japan's suggested 2% target for 15 consecutive months, reversing decades of deflation.
Do you think the upward trend in Japanese stocks is sustainable? What do you think is driving global investor interest in the Japanese stock market?
Join us and share your thoughts on today's topic Please leave a comment below to share your opinion with us. Your feedback is valuable, and we appreciate your participation.
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ZnWC : The reasons for investing in Japanese stocks include 4th largest economy, politically stable, technologically advanced and large domestic market. But there are risk such as high inflation rate, risk of recession (or stagflation), protectionism in certain sectors and aging population.
The five trading firms that Berkshire Hathaway (BH) has invested in Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui, and Sumitomo Corp. are the biggest of Japan's so-called sogo-shosha, or general trading companies. As retail investors, we can't invest like BH which can hold stock for many years.
I want to believe that the upward trend in Japanese stocks is sustainable. Japanese stocks will be a good place to diversify your portfolio if you hold too much shares in US and China.
102765799 : Several choices for the investor, it might be better to focus on a few larger and more familiar territories than to spread himself too thin having to deep dive into many world markets. unless one is very savvy and reads widely
Kopikarp : Japanese stocks have been gaining traction in 2023, driven by factors such as corporate governance reforms and improving investor sentiment. The corporate environment in Japan has seen positive changes over the past eight years, attracting both domestic and foreign activist investors. This shift in corporate governance has piqued investor interest, especially considering the historically weak corporate structures and Japanification issues that deterred many fund managers in the past.
The appeal of Japanese stocks lies in the presence of high-quality, globally-oriented companies with capable management teams. These companies enjoy strong barriers to entry, providing investors with growth opportunities not only in Japan but also in developing countries. The potential for exposure to these markets contributes to the attractiveness of Japanese stocks.
The recent success of Japanese stocks can be attributed to several factors. The yen's depreciation has played a role, boosting the competitiveness of Japanese companies. Additionally, the Bank of Japan's loose monetary policy, while major central banks elsewhere are raising interest rates, has attracted global funds seeking relative stability and potentially higher returns.
However, the sustainability of the upward trend in Japanese stocks remains uncertain. While the upward trend in Japanese stocks has garnered attention and optimism, there are potential risks that investors should consider. One key risk is Japan's aging population and demographic challenges, which can impact consumer spending, labor market dynamics, and economic growth. Additionally, Japan faces long-standing structural issues such as high government debt, limited fiscal flexibility, and deflationary pressures. Geopolitical tensions and global economic uncertainties can also affect the Japanese market.
Sg-Jin : Money printer goes brrr. Something gonna snap soon 🫰
Now I’m cash gang. Waiting on the collapse. Things move in cycles.
SpyderCall : The fundamentals in the Japanese economy are very accommidative for equities. With super low interest rates and a central bank that is trying to spur inflation, Japan has the perfect ingredients for an equity rally. Buffet only added fuel to the fire.
The most obvious reason for investing in Japan is the fact that the trend in price action has flipped from bearish to bullish. The Japanese stock market is now trending upwards. There has been increasing relative volume day after day since the price action has climbed above a long-term trending resistance level. This is a bullish indicator and it confirms the change in the trend.
And remember that a trend is your friend in the market. Don't fight the trend and go short when the market is rallying.
Here are a few equity ticker symbols to trade in the US markets to gain some exposure to this Japanese rally.
$ProShares Ultra MSCI Japan (EZJ.US)$$Franklin FTSE Japan ETF (FLJP.US)$$Franklin FTSE Japan Hedged ETF (FLJH.US)$$WisdomTree Japan Hedged Equity ETF (DXJ.US)$$iShares MSCI Japan ETF (EWJ.US)$$Ishares Jpx-Nikkei 400 Etf (JPXN.US)$$Wisdomtree Japan Hedged Smallcap (DXJS.US)$$Ishares Inc Msci Japan Small-Cap Etf (SCJ.US)$