© Reuters. Buffett’s movements attract a lot of attention! Is the mad bull market behind Japanese stocks hitting a 33-year high going to start again?
Financial Associated Press News on November 21 (Editor Xiaoxiang)After nearly four months of silence, with the issuance of Japanese yen bonds by Berkshire Hathaway under Warren Buffett for the second time this year, many Japanese stock bulls seem to be ready to make a move…
Although the Nikkei 225 index fell slightly on Tuesday, it rose to 33853.46 points in intraday trading the next day, setting a new high in 33 years after four months. Currently, the blue-chip index has risen nearly 30% this year. Positive factors such as the weak yen, solid corporate profits, and corporate governance reforms advocated by the Tokyo Stock Exchange have all provided strong support to the stock price.
Charu Chanana, market strategist at Saxo Markets, said, “Potential structural changes in Japan’s economy continue to drive the rise of Japanese stocks. At the same time, the market expects that the Fed’s interest rate hike cycle has ended, which has also given a helping hand to the Japanese stock market, while Japanese corporate performance has been in this round. A strong earnings season is at the center of the recent rally.”
Part of the reason for this round of rebound in Japanese stocks is the strong earnings season – the yen exchange rate fell to a one-year low in the third quarter, which boosted the profit prospects of exporters, and companies are also passing on higher costs to Consumers – This was almost unimaginable before the pandemic.
at the same time,There are signs that Japanese stocks are once again beginning to attract large foreign capital inflows as global concerns about the Federal Reserve’s interest rate hikes ease.
Data from Japan Exchange showed that foreign investors bought a net 1.12 trillion yen ($7.4 billion) worth of stocks in the week to November 10, the largest trade since the week of June 16. Weekly net buying volume. Judging from the flow of funds, these overseas funds are mainly concentrated in derivatives, totaling approximately 1.04 trillion yen, and an additional 78.3 billion yen are directly invested in stocks.
Throughout the year, the Japanese stock market has attracted a net inflow of 5.96 trillion yen from foreign investors so far this year. This figure is in sharp contrast to the net outflow of 4.07 trillion yen in the same period last year.
It is worth mentioning that,Similar to the rise of Japanese stocks in the first half of this year, which almost coincided with Buffett’s move to increase Japanese stocks, Berkshire’s recent new moves in the Japanese market have also attracted the attention of many investors.
Last week, Buffett’s Berkshire Hathaway issued 122 billion yen worth of yen bonds, marking the company’s second issuance of yen bonds this year. Some industry insiders also speculated that Buffett is likely to increase his bets on Japanese stocks again. Japanese banks, insurance companies and automobile manufacturers may become the next targets of stock investors.
Survey predicts Japanese stocks are expected to rise further next year
According to a latest survey released by industry media on Tuesday, the Nikkei 225 Index’s more than 28% rise during the year is expected to continue all the way to 2024 – it is expected to rise to 35,000 points by the end of June next year, further refreshing more than 30 years. High position.
The range of estimates in the survey of stock strategists conducted from November 10 to 20 ranged from 31,143 to 39,500. All respondents forecast continued growth in Japanese corporate profits, although many also expected the positive effects of a weaker yen to dissipate as the Bank of Japan’s ultra-loose stimulus comes to an end and the Federal Reserve’s tightening cycle peaks.
A team led by Yunosuke Ikeda, chief equity strategist at Nomura Securities in Tokyo, pointed out in a recent research report that there are three reasons why Japan’s stock market has been rising this year: the Japanese economy is gradually getting rid of deflation; the governance of Japanese companies has improved; and Japan’s attraction as a diversified investment in Asia force.
Nomura believes that this situation is expected to continue in 2024. As U.S. interest rates fall, a stronger yen may bring headwinds to Japan, but the increase in profit margins brought about by inflation will prompt Japanese companies to continue to grow profits in the 2024-2025 fiscal year. Nomura predicts that the Nikkei 225 Index will reach 38,000 points by the end of December 2024.
Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management in Tokyo, pointed out that business investment and consumer demand, especially demand in the service industry, have been suppressed before. Therefore, he predicts that the Nikkei 225 Index will reach 39,500 points in June next year. It will reach 40,900 points by the end of 2024 – the most bullish forecast in the survey.
“We are constructive mainly because we are optimistic about nominal GDP growth and there is still room for stock prices to reflect a better scenario of earnings per share growth,” Kichikawa said.
However, Kichikawa and other respondents also said that the yen hit 152 to the dollar earlier this month on expectations that the Federal Reserve may start cutting interest rates around May next year and the Bank of Japan may exit its negative interest rate policy early next year. After the yuan’s trough, it may have hit the bottom. This may mean some stagnation in the Japanese stock market’s rise in the second half of next year, with the Nikkei 225 index still stuck at 35,000 points at the end of next year, according to the survey’s median.
Tony Sycamore, an analyst at British investment bank IG in Sydney, is one of the most bearish analysts on Japanese stocks. He is one of only two analysts to predict that the Nikkei 225 index will fall from 35,000 points to 33,000 points in the second half of next year.
Sycamore noted that 35,000 appears to be the peak level where the Nikkei’s rally coincides with the timing of the Bank of Japan’s removal of its negative interest rate policy. The Nikkei 225 currently still has support from the Bank of Japan lagging the yield curve. But at some point early next year, the Bank of Japan will need to do what it needs to do, and that won’t be good news for stocks.