Bulls And Bears On Japan: Value Investors Dive In

Bulls and bears on Japan: equities

The Nikkei has underperformed U.S. equities in the last two months despite the fact that the yen hasn't strengthened against the dollar. Thieliant and Learmouth say that was because Japanese corporate earnings have been weak. However, they believe Japanese equities started the year with attractive valuations compared to U.S. equities. They predict that the Nikkei 225 will rise to 26,000 by the end of 2021.

Investors are starting to notice the attractive valuations in Japanese equities. Nomura analyst Naka Matsuzawa said weekly flow data revealed that foreign investors were "major net buyers" of Japanese equities the week of Feb. 3. They bought ¥791.7 billion worth of Japanese equities in what was the first week of net buying in six weeks.

Foreign investors essentially replaced some of the ¥1.7 trillion worth of Japanese equities they had sold in the five weeks before. Most of the buying was futures, and he believes it was due to the unwinding of excessive hedging.

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