Japan stock indexes hit 33-year highs as investors warm to the Tokyo story

Japan’s shares rose to their highest in 33 years on Tuesday on rising hopes of higher governance standards and more serious respect for shareholders after decades of lackluster returns.

The broader Topix index rose about 0.6 percent on Tuesday, up 13.9 percent so far this year and nearing its highest level since Japan’s infamous market bubble burst in late 1989. The Nikkei 225 index is up more than 16. Per cent since the start of the year and again near post-bubble highs, making Japan one of the hottest markets in the world.

According to the Tokyo Stock Exchange, foreign investors poured in shares and futures over the past five weeks, with net inflows reaching nearly $30bn during the period, some of the largest inflows in the last decade.

As well as euphoria over the potential for a historic rebalancing of corporate priorities, investors also noted that Japan is benefiting from “not-China” trade, a belief that Tokyo is a safe way to gain exposure to Chinese growth. But with less geopolitical risk.

The interest in Japan comes after years of false positives and anemic returns, which persuaded many fund managers to stay away from Japan and its tangled corporate structures, especially with the rich returns available elsewhere.

In the time it has taken Japanese stocks to recover from the 1989 crash, US equities have risen more than 10 times.

However, some are warming to the notion that Tokyo’s stock market is now a repository of high-income, low-value stocks with a sweeping wave of corporate governance reforms.

Srikant Kale, Japan equity strategist at Jefferies, said he had not seen such interest from foreign investors in Japan since the early days of the “Abenomics” era in 2012, when Shinzo Abe took office as prime minister and the market with efforts Oriented reforms were promised. To give a boost to the dying economy.

Adding to the momentum was a rare visit to Japan by Warren Buffett last month, when the American investor made it clear he was keen to add Japanese investments to his portfolio.

At the same time, Japan stands out as a large developed Asian market that should benefit from China’s economic recovery without the geopolitical risks associated with its superpower neighbor, especially Taiwan, several fund managers said.

Kale said Japan might be “the best non-China option for a global investor”.

“Some investors think that Japanese companies have huge upside risk in China, but also that you can position them as a hedge against geopolitical risk,” said Yunosuke Ikeda, chief Japan equity strategist at Nomura Securities.

Many Japanese companies provide exposure to China through exports or because they benefit greatly from Chinese travel to Japan.

Some investors said Japan’s relatively predictable policymaking also gives it an edge over China, where regulatory action could be swift and damaging.

“Japan occupies an interesting position geopolitically, and it is not lost on investors that the rule of law is taken seriously and corporate governance governance is at the heart of equity,” said Carl Wines, co-head of the Asia-Pacific equity team. Very friendly to the owners.” On M&G Investments.

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Despite the perceived optimism of many investors and the momentum behind the current rally, the “Buy Japan” theme has yet to drive a sustained reallocation of assets. In Bank of America’s latest survey of global fund managers, which was released Tuesday and covered a survey period beginning in May, a net 11 percent of respondents underweight Japan, up one percentage point from the previous survey. The score was down.

But evidence of momentum toward improving Japanese corporate governance and their treatment of shareholders is drawing investment into Japanese stocks.

In recent months, Hiromi Yamaji, the new head of Japan Exchange Group, which controls the Tokyo Stock Exchange, suggested companies take stronger positions to boost their corporate value.

Companies need to pay closer attention to their price-to-book ratio, share price and capital cost, he told Japanese media, announcing that he would look at how many listed companies implemented the 2015 governance code. were not “satisfied”.

“The (Tokyo Stock Exchange) topic is resonating with a lot of foreign investors and they’re starting to see evidence of that on the ground,” said Bruce Kirk, chief Japan equity strategist at Goldman Sachs. Driven by these changes to the exchange, Kirk said, many companies are buying back shares, which often confuses cross-shareholding and connects more closely with shareholders.

Announced buybacks in corporate Japan reached an all-time high of ¥9.7tn ($71.4bn) in the fiscal year that ended in March.

Analysts expect companies to set a new record for buybacks by late May ahead of annual meeting season, where managements will be under more intense pressure to demonstrate they are paying attention to recent comments from the Tokyo Exchange.

Jeff Atherton, head of Japanese equities at hedge fund group Man GLG, said the exchange’s stimulus means “more has happened to it in the past two years than in the last 30,” the biggest single reason for the stock’s upbeat performance.

“The exchange has a determined approach to enhancing return on equity,” Atherton said. “They want the market capitalization to go up.” Executives can see that “among the world’s top 500 companies, there are very few Japanese, and this hurts their ability to compete”, he said.

Buffett’s visit attracted attention, but foreign investors said it did not improve the country’s fundamentals.

“It’s not Warren Buffett that makes it interesting. He’s seeing what others are seeing,” said Vine at M&G. “I’m very excited” from that point of view, he said.

Japan’s shares rose to their highest in 33 years on Tuesday on rising hopes of higher governance standards and more serious respect for shareholders after decades of lackluster returns.

The broader Topix index rose about 0.6 percent on Tuesday, up 13.9 percent so far this year and nearing its highest level since Japan’s infamous market bubble burst in late 1989. The Nikkei 225 index is up more than 16. Per cent since the start of the year and again near post-bubble highs, making Japan one of the hottest markets in the world.

According to the Tokyo Stock Exchange, foreign investors poured in shares and futures over the past five weeks, with net inflows reaching nearly $30bn during the period, some of the largest inflows in the last decade.

As well as euphoria over the potential for a historic rebalancing of corporate priorities, investors also noted that Japan is benefiting from “not-China” trade, a belief that Tokyo is a safe way to gain exposure to Chinese growth. But with less geopolitical risk.

The interest in Japan comes after years of false positives and anemic returns, which persuaded many fund managers to stay away from Japan and its tangled corporate structures, especially with the rich returns available elsewhere.

In the time it has taken Japanese stocks to recover from the 1989 crash, US equities have risen more than 10 times.

However, some are warming to the notion that Tokyo’s stock market is now a repository of high-income, low-value stocks with a sweeping wave of corporate governance reforms.

Srikant Kale, Japan equity strategist at Jefferies, said he had not seen such interest from foreign investors in Japan since the early days of the “Abenomics” era in 2012, when Shinzo Abe took office as prime minister and the market with efforts Oriented reforms were promised. To give a boost to the dying economy.

Adding to the momentum was a rare visit to Japan by Warren Buffett last month, when the American investor made it clear he was keen to add Japanese investments to his portfolio.

At the same time, Japan stands out as a large developed Asian market that should benefit from China’s economic recovery without the geopolitical risks associated with its superpower neighbor, especially Taiwan, several fund managers said.

Kale said Japan might be “the best non-China option for a global investor”.

“Some investors think that Japanese companies have huge upside risk in China, but also that you can position them as a hedge against geopolitical risk,” said Yunosuke Ikeda, chief Japan equity strategist at Nomura Securities.

Many Japanese companies provide exposure to China through exports or because they benefit greatly from Chinese travel to Japan.

Some investors said Japan’s relatively predictable policymaking also gives it an edge over China, where regulatory action could be swift and damaging.

“Japan occupies an interesting position geopolitically, and it is not lost on investors that the rule of law is taken seriously and corporate governance governance is at the heart of equity,” said Carl Wines, co-head of the Asia-Pacific equity team. Very friendly to the owners.” On M&G Investments.

You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.

Despite the perceived optimism of many investors and the momentum behind the current rally, the “Buy Japan” theme has yet to drive a sustained reallocation of assets. In Bank of America’s latest survey of global fund managers, which was released Tuesday and covered a survey period beginning in May, a net 11 percent of respondents underweight Japan, up one percentage point from the previous survey. The score was down.

But evidence of momentum toward improving Japanese corporate governance and their treatment of shareholders is drawing investment into Japanese stocks.

In recent months, Hiromi Yamaji, the new head of Japan Exchange Group, which controls the Tokyo Stock Exchange, suggested companies take stronger positions to boost their corporate value.

Companies need to pay closer attention to their price-to-book ratio, share price and capital cost, he told Japanese media, announcing that he would look at how many listed companies implemented the 2015 governance code. were not “satisfied”.

“The (Tokyo Stock Exchange) topic is resonating with a lot of foreign investors and they’re starting to see evidence of that on the ground,” said Bruce Kirk, chief Japan equity strategist at Goldman Sachs. Driven by these changes to the exchange, Kirk said, many companies are buying back shares, which often confuses cross-shareholding and connects more closely with shareholders.

Announced buybacks in corporate Japan reached an all-time high of ¥9.7tn ($71.4bn) in the fiscal year that ended in March.

Analysts expect companies to set a new record for buybacks by late May ahead of annual meeting season, where managements will be under more intense pressure to demonstrate they are paying attention to recent comments from the Tokyo Exchange.

Jeff Atherton, head of Japanese equities at hedge fund group Man GLG, said the exchange’s stimulus means “more has happened to it in the past two years than in the last 30,” the biggest single reason for the stock’s upbeat performance.

“The exchange has a determined approach to enhancing return on equity,” Atherton said. “They want the market capitalization to go up.” Executives can see that “among the world’s top 500 companies, there are very few Japanese, and this hurts their ability to compete”, he said.

Buffett’s visit attracted attention, but foreign investors said it did not improve the country’s fundamentals.

“It’s not Warren Buffett that makes it interesting. He’s seeing what others are seeing,” said Vine at M&G. “I’m very excited” from that point of view, he said.