Political change

Japanese stocks shine as foreign investors bet on stimulus and political change

* Japan on track to become top performing stock market in September

* Suga’s departure raises hopes for change and political revival

* Foreign investors bought 2,000 billion yen of Japanese stocks

TOKYO, Sept. 24 (Reuters) – Japanese stocks could win a rare gold medal this month, on course to become the best-performing market in the world, as foreign investors crowd in hopes of an economic recovery, improving the deployment of vaccines and the expectations of a new Prime Minister.

The MSCI Japan is up 6.0% this month, by far the best performance among the major markets.

The MSCI gauge of US and European markets fell more than 1% while emerging markets lost more than 2.5%.

Japanese stocks have long been overlooked by global investors as Japan’s slow economic growth, unfavorable demographics, and eroding competitiveness in the tech sector prompted them to seek higher returns elsewhere.

Prime Minister Yoshihide Suga’s unpopular resignation offer on September 3, however, triggered massive inflows of foreign funds into the market.

Investors are betting that a new leader will be more popular and easily win the next election due by November. A new stimulus plan is also expected to support households and businesses affected by the pandemic.

Data from the Japan Exchange Group showed that foreign investors paid in around two trillion yen in the past three weeks.

“For many of our investors, Japan is a very weak asset. Many of our clients only own 0%, 1% or 2% of the portfolios in Japan. But in a benchmark of global equities, Japan should be at 6% instead. So we have a lot of potential from an ownership perspective, ”said Kiran Ganesh, Managing Director of UBS Global Wealth Management in London.

“In terms of catalysts, we think we will see more fiscal stimulus after the election … Overall, there is a lot to like about the Japanese market right now, it has been our favorite for a few months now. . “

Admittedly, the exchange data shows that recent purchases have mostly been made with futures rather than spot stocks, suggesting that it has been led by short-term speculators rather than long-term investors. term.

Some investors also said they had not changed their stance on Japanese stocks in recent weeks.

BlackRock, the world’s largest asset management firm, for example, said its stance in Japan remained neutral after upgrading it in early July.

Still, some other fund managers have said they have a positive view of the market.

Mary Nicola, global multi-asset portfolio manager at PineBridge Investments in Singapore, said hopes for reform could accelerate if Taro Kono, the minister for administration reform, wins the Liberal leadership election -democrat next week.

“The three perspectives we see for Japan are: first, catching up with other markets as vaccinations progress; second, politics with the upcoming elections in Japan’s reform program; and finally, the global shortage in the semiconductor cycle, which is expected to pick up and support their automotive industry. “

Reporting by Hideyuki Sano and Tomo Uetake; edited by Jason Neely


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