Foreign investors return to Japan stocks, Nikkei hits highest since 1990

Japan’s Topix Index hit its highest point since August 1990, a sign that foreign investors are back. The Tokyo Price Index, also known as Topix, has gained more than 6% year-to-date. The broad-based index, made up of about 2,000 constituents, has outperformed its regional peers in the Asia-Pacific.

The Topix rose 0.6% on Tuesday and continued to trade higher on Wednesday, led by utilities, consumer cyclicals, technology and financials. Shares of Tokyo Electron, Oriental Land, Softbank Group, Sony and Nintendo were among the top gainers on Wednesday morning.

“Foreign investors are back – which says something about the nature of the equity market recovery in Japan,” Societe Generale’s Asia equity strategists Frank Benzimra and Tsutomu Saito said in a Tuesday note.

“That is a less [of] a duration trade than a broad-based upturn based on fundamentals, robust domestic demand, and more generous distribution policy (share buybacks accelerate),” he wrote.

The firm noted that foreign investors bought a net 2.1 trillion yen ($15.4 billion) worth of Japanese stocks in April – adding that Japan’s corporate sector remains the largest net buyer of Japanese stocks, with a volume of 1.1 trillion yen year-to-date.

The Nikkei 225 also rose to the highest since November 2021, also led by industrial names including NSK, Mitsubishi Materials, and Nippon Sheet Glass. The index topped the psychological level of 30,000 on Wednesday morning.

Goldman Sachs’ said in a May 12 report that the investment bank sees a “number of reasons” to support its bullish stance on Japanese stocks.

“Specifically, we note the solid fundamentals compared with stocks on overseas markets, and we also think that expectations for structural changes/reforms could push Japanese equities up even further,” wrote Japan equity strategist Kazunori Tatebe.

Source: CNBC

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