Wall Street bank Morgan Stanley said in a customer report that extreme optimism surrounding the Japanese stock market has repeatedly reached new highs has driven large inflows of capital into ADR for Asian stocks listed in the US so far this year.
Wall Street bank Morgan Stanley said in a customer report that extreme optimism surrounding the Japanese stock market has repeatedly reached new highs has driven large inflows of capital into ADR for Asian stocks listed in the US so far this year. According to the report, dated February 26, global institutional investors, led by US and European hedge funds, have net purchases of up to 20.4 billion US dollars of shares of Asian companies traded in the US, which is expected to hit a new high of quarterly net inflows.
In most quarters of the past 4 years, there was a large net outflow from Asian stocks (that is, Asian ADR) in US stocks. Statistics show that most of the net purchases in the first two months of this year were in the US listed Japanese stock ADR. These madly bought Japanese ADRs were mainly concentrated in the Bank of Japan and the automobile sector.
According to the capital statistics of the US stock market quoted by Morgan Stanley,$Mitsubishi UFJ Financial (MUFG.US)$,$Sumitomo Mitsui Financial (SMFG.US)$,$Nomura Holdings (NMR.US)$,$Honda Motor (HMC.US)$,$Toyota Motor (TM.US)$and$Takeda Pharmaceutical (TAK.US)$It ranks at the top of the scale of ADR capital inflows to Japanese stocks in the US stock market. Meanwhile, Morgan Stanley said that in terms of the scale of sales, Indian and Singaporean companies listed in the US have been hit the hardest.
Analysts at Morgan Stanley said that stable inflation and rising wages for the first time in decades, as well as the Tokyo Stock Exchange's continued helping Japanese companies whose stock prices fall below book value and whose asset value is seriously undervalued by the market for many years will be key drivers to further attract foreign capital into the Japanese stock market this year.
On Tuesday, the core consumer price index (core CPI) of Japan, Asia's second-largest economy, rose 2.0% in January. Although it has slowed down from December last year, it exceeded economists' general expectations and remained within the Bank of Japan's 2% target, indicating that long-lost inflation has begun to seep into every corner of Japanese society.
“We are still in the early stages of foreign capital inflows,” said Kei Okamura, a Japanese equity portfolio manager from Neuberger Berman. He added that the overall valuation of the Japanese stock market is still very low, but the scale of foreign capital inflows is still far below the historical peak in 2015.
The Nikkei 225 Index, the benchmark for blue chips in Japan, soared to an all-time high last week, breaking through the all-time high of 38,957 points created by Japan during the “bubble economy” period in 1989. However, according to some analysts, the pace of foreign capital inflows into the Japanese stock market may have just begun. The strong rise in the Japanese stock market is expected to continue for the rest of this year. Citi even chanted that the 2024 Nikkei 225 Index is expected to rush to 45,000 points.
The strong profit performance of Japanese companies in the fourth quarter prompted Bank of America's Japanese stock strategists to raise the agency's forecast for the Nikkei 225 index at the end of 2024 from 38,500 points to 41,000 points. Furthermore, they also raised the forecast for the Eastern Stock Exchange Index from 2,715 points to 2,850 points.
According to the forecast of Yue Bamba, head of active investment in the Japanese stock market at BlackRock (BlackRock), the long-awaited potential scenario where the Bank of Japan gradually withdraws from the ultra-loose monetary policy, which global investors have been waiting for, may have an unusual impact. In particular, it may make the Japanese stock market one of the beneficiaries of the Bank of Japan's interest rate hike.
The strategy director also pointed out that Japan's environment, which still favors easing, is in stark contrast to the significantly restrictive monetary environment in the European and American markets. In addition, the allocation weight of undervalued Japanese stocks in global portfolios is significantly lower than that of the European and American stock markets, which means that a larger scale of global capital will flow into the Japanese stock market in the future. The potential increase in the yen exchange rate of 10-15% may even be “positive news” for the Japanese stock market.
Editor/Somer