FX168 Financial News (North America) News According to Bloomberg's latest survey, investors expect the rise in the Japanese stock market to gradually slow in the second half of 2024.
According to the average estimates of asset managers and strategists surveyed by Bloomberg, the benchmark index for the Japanese stock market — the TSE Index — will rise about 2.9% to 2,890 points by the end of this year, while the Nikkei 225 Index is expected to rise about 4.8% to 41,489 points. Compared to the increase of about 18% in the first half of this year, there will be a clear slowdown. Just this past Friday, the Eastern Stock Exchange Index once broke through the March high and hit a new high in 34 years, with financial stocks leading the way.
However, concerns about the continued weakening of the yen are weighing on market sentiment. In addition, consumers and businesses have also cut spending, and one-third of BOJ observers surveyed by Bloomberg earlier this month predicted that the Bank of Japan would raise interest rates in July. The inflation data released on Friday morning picked up in June, which may prompt the Bank of Japan to continue discussions on interest rate hikes at the July meeting.
Kyle Rodda, senior market analyst at Capital.Com, said, “I don't think the Japanese stock market will perform well in the future. Considering the rebound at the beginning of the year, basic economic and policy trends suggest that downside risks outweigh upside risks.”
The yen fell to 161 against the US dollar on Friday, likely to fall to its lowest level since 1986. Some market participants are even expecting the yen to fall to 170 against the US dollar.
Although the weak yen favors exporters, it has also boosted inflation through imports. This in turn has lowered real wages, which many market participants believe is the key to the rise in the Japanese stock market.
Currency risk and economic slowdown have led some foreign investors to look beyond Japan. Currently, the price-earnings ratio of the Tokyo Stock Exchange Index is about 17 times, while the price-earnings ratio of the Shanghai Stock Exchange Index is 14 times. Foreign investors have been selling Japanese stocks for five consecutive weeks, the longest sell-off cycle since March last year.
Alexander Cousley, investment strategist at Russell Investments, said, “We think the Japanese stock market may lag behind the Chinese stock market (in the second half of the year), but it will still perform well in the Asian market as a whole. Because the valuation is there, Chinese stocks are clearly cheaper than Japanese and global stocks.”
Despite this, many people are still optimistic about the Japanese stock market, and companies such as BlackRock continue to increase their holdings in Japanese stocks. Japan remains the region's most popular market, according to a Bank of America survey of fund managers in June. According to data compiled by Bloomberg, the earnings per share of the MSCI Japan Index are expected to increase by 16% over the next 12 months, while the earnings per share of the MSCI World Index are expected to increase by only 8.5%.
Alexander Wolf, head of Asian investment strategy at J.P. Morgan Chase Bank, wrote in a report this month: “Japanese companies' profits have outperformed the global economy, and are expected to improve further this year, leading other developed countries by an increase of around 11%-13%.”