Japan’s Share Market Faces Foreign Investor Sell-Off
Japan’s share market rebounds despite foreign investors selling off Japanese stocks due to a sluggish economy. This trend is highlighted by the recent actions of Citigroup and Abrdn, among other banks, which have grown pessimistic about Japan’s equities. The uncertainty surrounding the Bank of Japan’s monetary policy and corporate governance reform outlook has contributed to this sell-off.
Foreign Investors Shift from Buying to Selling
A survey by Bank of America shows about a third of respondents believe the market has peaked. This sentiment is evident as foreign investors, who once helped push Japanese shares to a record high, have become net sellers for a fourth straight week through June 14. The Nikkei stock average index, which reached an all-time high on March 22, has since stalled, dropping 5.6%.
Questioning the Sustainability of Japan’s Share Market
Investors are questioning the sustainability of the drivers for Japanese stocks. Foreign investors are now selling a net ¥250 billion ($1.6 billion) worth of Japanese stocks in the week ended June 14. Despite the sluggishness of shares, strategists at BlackRock and Morgan Stanley remain positive on Japan’s long-term outlook, suggesting that Japan’s share market may still have potential for growth.
Bank of Japan’s Monetary Policy Impact
The Bank of Japan’s second interest-rate hike in July is expected to be a key factor in investors’ decisions. The outcome of this policy decision could significantly influence the future trajectory of Japan’s share market. Despite current challenges, some analysts believe that the Bank of Japan’s actions could help stabilize and potentially rejuvenate the market.
Preferences Shift to Chinese and Indian Stocks
Abrdn, a notable investment management company, has expressed a preference for Chinese and Indian stocks over their Japanese counterparts in the next three to six months. This shift indicates a growing concern about the near-term prospects of Japan’s share market, despite some positive long-term outlooks from other strategists.
What’s Ahead for Japan’s Share Market
Looking ahead, Japan’s share market rebounds will depend on several factors, including the Bank of Japan’s monetary policy decisions and broader economic conditions. While foreign investors continue to sell off Japanese stocks, the market’s long-term potential remains a topic of debate among experts. The actions of major financial institutions and the performance of other Asian markets will also play a crucial role in shaping investor sentiment and market dynamics. Despite the current challenges, Japan’s share market could see a resurgence if key economic indicators improve, and confidence is restored.