Asia-Pacific markets collectively rise!
On Tuesday, the Japanese stock market opened high and rose steadily, with the Nikkei 225 Index rising by more than 2% at one point during the day, closing up by 1.93% at 38,651 points. In addition, the Manila Index in the Philippines rose by more than 1%, the Jakarta Composite Index in Indonesia rose by 0.61%, the Ho Chi Minh Index in Vietnam rose by 0.76%, and the SET Index in Thailand rose by 0.83%.
On that day, the Japanese stock market welcomed multiple pieces of positive news.
Firstly, in the latest meeting minutes, the Bank of Japan remains cautious about raising interest rates. On October 1st local time, Fumio Kishida, the new leader of the Liberal Democratic Party of Japan, received more than half of the votes in the temporary Prime Minister nomination elections held in both the House of Representatives and the House of Councillors, and formally became the 102nd Prime Minister of Japan. Kishida shows a cautious attitude towards raising interest rates, potentially aiming to dispel market tightening concerns.
Secondly, Berkshire Hathaway, owned by Buffett, plans to issue its second yen-denominated bond in global markets this year, sparking speculation of Buffett increasing investment in the Japanese market.
Thirdly, data released today shows that Japan's unemployment rate in August was 2.5%, a decrease of 0.2 percentage points from the previous month, better than market expectations.
Japanese stock market rebounds
After experiencing a panic-induced major drop on Monday, the Japanese stock market rebounded on Tuesday. The Nikkei 225 index rose by over 2% at one point during Tuesday's trading. By the close, it rose by 1.93% to 38651 points.
In terms of individual stocks, Kawasaki Heavy Industries rose by over 9%, Mitsubishi Heavy Industries rose by over 8%, Nippon Steel rose by over 7%, Rohm Semiconductor rose by over 5%, Japan Exchange rose by nearly 5%, Sumitomo Corporation rose by over 4%, Itochu Corporation, Renesas Electronics, NEC Corporation, Tokyo Seimitsu, Nomura Holdings, etc. rose by over 3%, SoftBank Group rose by 2.86%.
However, on September 27, shortly after Fumio Kishida was elected as the new leader of the Liberal Democratic Party of Japan, the yen sharply appreciated, and the Nikkei Index futures plunged by over 2000 points. On September 30, the Nikkei 225 Index fell by 4.8% and dropped below 38,000 points, Toyota Motor, Tokyo Electron fell by nearly 8%, SoftBank Group fell by over 7%. The reason for causing panic in the Japanese stock market is because on the eve of the general election, Fumio Kishida supported the Bank of Japan's policy of steadily raising interest rates and expressed concerns about the devaluation of the yen. Traders are worried that the Bank of Japan will continue to gradually tighten monetary policy, which may suppress the upward trend of the Japanese stock market.
However, after concerns arose in the financial markets about Fumio Kishida pushing forward contractionary economic policies, on September 29, Fumio Kishida expressed a cautious attitude towards the Bank of Japan's early rate hike in a TV program. Fumio Kishida said, "Even now, the direction of monetary easing must be maintained in the future." This restrains the central bank that has already stated that it will discuss raising rates again if the consumer price index moves as expected. Some Japanese media commentators have suggested that Fumio Kishida's stance may be aimed at dispelling market concerns before the start of government on October 1.
On October 1st local time, Fumio Kishida, the new leader of the Liberal Democratic Party of Japan, won formal election as the Prime Minister of Japan in the prime ministerial nomination election held in the temporary House of Representatives and the House of Councillors, receiving more than half of the votes in each chamber. In the morning, the Japanese Kishida Cabinet collectively resigned at a temporary cabinet meeting.
Of note, in the latest September policy meeting minutes disclosed by the Bank of Japan, the central bank stated that the financial markets remain unstable, and in the current situation of instability in the financial and capital markets, it will not raise interest rates, and it indicates that at present, the central bank "should patiently maintain the current loose financial environment."
According to the Bank of Japan's September policy meeting minutes, a participating member explicitly stated that if the price trend meets expectations, the central bank's stance on adjusting its monetary support measures will remain unchanged. However, the member also emphasized the need to maintain a high degree of vigilance against the current market instability and deeply analyze the underlying potential factors. This statement highlights the Bank of Japan's continued attention to market dynamics and a cautious attitude while maintaining monetary policy stability.
Buffett "increasing" investment in Japan?
On October 1st, Bloomberg reported that Warren Buffett's Berkshire Hathaway is planning to conduct its second issuance of yen-denominated bonds in the global market this year, sparking speculation that the company is seeking to increase its investments in Japan.
Berkshire Hathaway hired Bank of America Securities and Mizuho Securities to issue yen-denominated senior unsecured bonds. Berkshire Hathaway has been a regular issuer of yen-denominated notes since 2019, with the last issuance of such bonds in April.
Berkshire Hathaway's fundraising plan has drawn close attention from stock market investors as Warren Buffett's previous purchase of shares in a Japanese trading company helped boost the Nikkei 225 Index to a historic high. In his February shareholder letter, Buffett stated that Berkshire Hathaway raised most of its investments in Japanese companies through issuing yen bonds.
Hidep securities' chief stock trading director in Japan, Takehiko Masuzawa, said that Berkshire Hathaway still has more room to increase its stake in the trading company, which is good news for those looking to buy stocks as it will provide them with the necessary impetus.
After the unexpected rate hike by the Bank of Japan in July, the Japanese TOPIX index recorded its first quarterly decline in two years. The rate hike boosted the yen and led to the unwinding of yen carry trades. "The simultaneous uncertainties in the US economy, tech stock adjustments, and the rise of the yen triggered a sharp decline in the stock market," said Masahiro Ichikawa, the chief market strategist at Sumitomo Mitsui DS Asset Management based in Tokyo. However, he noted that the overall attractiveness of Japanese stocks remains intact, and if developed market central banks can curb inflation without causing an economic downturn, the potential appeal of Japanese stocks will further strengthen.
It is worth noting that Buffett is continuing to sell off US stocks, with the divestment of Bank of America shares ongoing. According to a recent filing with the US Securities and Exchange Commission (SEC), Berkshire Hathaway reduced its holdings of Bank of America stock on three consecutive trading days from September 25th to 27th, totaling a reduction of 11.678 million shares and realizing approximately $0.461 billion. Currently, Berkshire holds a 10.3% stake in the second-largest US bank, nearing the 10% "regulatory threshold." As long as it remains above this 10% threshold, Berkshire must disclose its trading activity within a few days. Once the ownership falls below this threshold, Berkshire will no longer need to disclose its trading activity within two working days as it does now.
At the age of 94, Buffett started selling off Bank of America stock in mid-July, cashing out approximately $9.4 billion. Based on last Friday's closing price, Berkshire Hathaway's remaining stake in the bank is worth nearly $32 billion, making it the largest shareholder of Bank of America.
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