Recently, Asian stock markets have been soaring, with many countries' stock markets surging collectively. Among them, the Nikkei 225 index and the TOPIX index, which were highly regarded by the market in the first half of the year, hit new historical highs in intraday trading on Friday. India and Taiwan stocks also hit new highs and became rising stars in the Asia-Pacific market, while South Korean and Singaporean stocks also reached new highs.
As the global interest rate cuts begin and the economic recovery is expected to drive, the MSCI Asia-Pacific index hit its highest point in more than two years. Market analysis generally points out that Asian stock markets are relatively undervalued. Since June, foreign investors' funds have continued to flow in, ending the situation of continuous withdrawal in the previous two months. Strong buying is expected to support its continued growth.
Which sectors of the Tokyo Stock Exchange, which has a wider coverage, are favored?
On Thursday, Japan's Tosei index ($TOPIX (.TOPIX.JP)$On Thursday of this week, the TOPIX index (
) kept rising. Compared with the Nikkei 225 index, which only covers 225 constituent stocks, the TOPIX index has a wider coverage- it includes more than 2,000 constituent stocks. Hiroyuki Isahara, chief strategist of Nomura Asset Management, said: "The Nikkei 225 index tends to lean toward certain stocks, while the trend of the TOPIX index is different. It indicates that the Japanese market as a whole has bottomed out and rebounded, and reached a new high."
However, the TOPIX index is considered the "Japanese version" of the S&P 500 index because it also has a relatively concentrated index situation. The TOPIX is dominated by the 30 largest stocks by market cap, including Toyota Motor Corp. (7203.JP), which accounts for 40% of the index.$Toyota Motor (7203.JP)$ and $Mitsubishi UFJ Financial Group (8306.JP)$This time, banks, technology and automobile companies also lead the record high of TOPIX index. Among them, banks and insurance companies are one of the best-performing companies since mid-April when the index hit bottom, because the market expects the Bank of Japan to raise interest rates, thus improving the profitability of these companies.
The cumulative increase this year is nearly 50%, and the increase in the year is nearly 70%. Among the constituent stocks, in addition to electronic device and chip companies such as KINSUS (6861.JP) which have achieved outstanding results under the promotion of the global AI boom, the shares of ARM, which bet on AI and ARM, also hit a 24-year high.$Mitsubishi UFJ Financial Group (8306.JP)$Nearly 50% cumulative increase within the year.$Sumitomo Mitsui Financial Group (8316.JP)$Nearly 70% increase within the year.
As a reference, the TOPIX index is a big winner of the "Trump trade"! The market's view on the reason for the rise in Japanese stocks is roughly the same as before, mainly attributed to expectations of economic growth, a weak yen, corporate governance reforms, and low valuations. $Keyence (6861.JP)$, $Hitachi (6501.JP)$, $Tokyo Electron (8035.JP)$Electronic appliances and chip companies have achieved impressive results under the global AI boom, successfully betting on AI and Arm companies.$SoftBank Group (9984.JP)$Electronic device and chip companies, such as KINSUS (6861.JP), which have achieved outstanding results under the promotion of the global AI boom, have also hit a 24-year high. Based on this experience, the TOPIX index is a big winner of the "Trump trade"!
Analysts believe that the depreciation of the yen will largely boost the Japanese economy, which is conducive to the export of manufacturers such as Toyota and Nissan. According to data compiled by the media, the manufacturing industry accounts for more than half of Japan's total market value.
The market's view on the reason for the rise in Japanese stocks is roughly the same as before, mainly attributed to expectations of economic growth, a weak yen, corporate governance reforms, and low valuations.
Jung Soon-woo, a global market strategist at Invesco Asia-Pacific, said that Japan's economy will have more sustainable growth momentum in the future. On the one hand, Japan's inflation has remained at a low level over the past few decades; on the other hand, the valuations of Japanese stocks are currently very attractive.
Analysts also stated that the depreciation of the yen will largely boost the Japanese economy, which is conducive to the exports of manufacturers such as Toyota and Nissan. According to data compiled by the media, the manufacturing industry accounts for more than half of Japan's total market value.
Goldman Sachs strategists believe that Japan's shift to inflationary economy and corporate governance reform will be two important structural changes in the Japanese stock market.
Meanwhile, as the U.S. presidential election heats up, a new narrative has emerged that the "Trump trade" will be bullish for Japanese stocks.
It is reported that in the year following Donald Trump's victory in the 2016 U.S. presidential election, the TOPIX index rose nearly 30% in USD terms, outperforming the S&P 500 index and the Morgan Stanley Capital International index, which rose about 20% each. One of the reasons is that during Trump's tenure, rising U.S. bond yields and a weak yen gave Japanese stocks a boost.
This situation has persisted this year: due to the large gap in yields between Japan and the United States, the yen has fallen nearly 13% against the dollar, the worst performance among major currencies. However, this has supported the rise of the Japanese stock market, which has been on a high all the way.
The reason for this is that Japan adopts an export-oriented economic development model, and a weak yen is actually beneficial to boosting the economy. According to data compiled by Bloomberg and the Tokyo Stock Exchange, the manufacturing sector accounts for more than half of Japan's total market value.
In the U.S. stock market, regional ETFs in Asia are beginning to attract funds.
Asian stocks have recently hit new highs, driven by strong buying by global funds. In June, foreign investors net bought $7.16 billion in Asian stocks, ending two consecutive months of outflows.
HSBC Investment Management said that on the emerging market side, investors are returning to the Asian market from Latin America this year, bringing attractive opportunities for Asia. The prospects for Asian economic growth are exciting, and the stock market is currently at a price-earnings ratio of 10 times, which is about average. The bank continues to attach importance to Asia.
In fact, there are many regional ETFs in Asia that are already trading hotly in the U.S. stock market, with gains and trading volumes surging. By region:
Focus on the Japanese stock market$WisdomTree Japan Hedged Equity ETF (DXJ.US)$this year's increase exceeded 32%,$ProShares UltraShort Yen (YCS.US)$up nearly 40%,$iShares MSCI Japan ETF (EWJ.US)$also steadily climbing;
Focus on the Indian stock market$WisdomTree India Earnings ETF (EPI.US)$, $Ishares Msci India Small Cap Etf (SMIN.US)$annual increase was nearly 20%,$iShares MSCI India Index ETF (INDA.US)$up more than 15% this year;
On other fronts, focusing on the Taiwan stock market.$iShares MSCI Taiwan ETF (EWT.US)$rose by more than 20%, focusing on star stocks in Asia.$S&P Asia 50 Index Ishares (AIA.US)$rose nearly 20%.
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