Japan** continues to play music carnival.
On February 9, the Nikkei 225 index, which is Japan's first benchmark, once exceeded 37,000 points intraday, continuing to refresh a new high in the past 34 years, approaching its all-time high at the turn of the last century.
With the continuous rise of Japan's ** attention, a number of institutions have recently released Japan's ** related strategic outlook. Many institutions are still optimistic about Japan** in 2024, believing that the growth trend may continue.
It is worth noting that since the beginning of this year, many institutions have warned about the risks of investing in Japan. An institution said that in the context of Japan's continuous upward trend and global investors increasing their weight in Japan, Japan's "core competitiveness" is weakening, and the short-term allocation cost performance is weakening. Another institution pointed out that Japan's upside has dual economic and financial factors, and these factors may face a reversal in 2024, and investors need to pay attention to potential risks.
Breaking through a new high in nearly 34 years
Since the first quarter of 2023, the Nikkei 225 index has maintained an upward trend, with an increase of 30 percent for the whole of 202313%。
Since 2024, Japan** has also performed well, as of February 9**, the Nikkei 225 Index** is at 3689742 points, the highest level since 1991, since the beginning of the year** more than 10%.
It is worth mentioning that on February 9, the Nikkei 225 index once broke through the 37,000-point mark, reaching a maximum of 37,287 points, the highest point in the past 34 years, and only 4% away from the all-time high of 38,957 points recorded in the late 80s and early 90s of the last century.
Nomura Oriental International recently pointed out in Japan's monthly investment strategy that there are four major factors behind the start of the year for Japanese stocks in 2024:
First, the Nikkei 225 index broke through the important threshold of 34,000 points, and market participants such as CTA (commodity trading advisors) increased their purchasing efforts;
Second, the selling pressure of individual investors has eased, and the supply and demand side has shown a shortage of sellers;
Third, the Bank of Japan will not rush to exit the negative interest rate policy, supporting the weakening of the yen;
Fourth, due to the high geopolitical uncertainty in the world, funds are pouring into the Japanese market.
Nomura Orient International believes that the above four factors are expected to continue to exert force for the time being, and the strong performance of the daily market is expected to continue in the future, but it is necessary to pay attention to the risk that the company's performance in the third quarter of fiscal 2023 is slightly lower than expected, which may have a negative impact on the stock price in the short term. It is recommended to focus on sectors that can withstand the impact of yen appreciation and benefit from price increases and a recovery in Japanese capital spending, such as construction, real estate, semiconductor manufacturing equipment, system applications, and food.
In a research report released on February 7, BOCOM International pointed out that before 2023, Japan's performance has been sluggish, mainly plagued by two major structural problems: deflation and poor corporate governance, which led to the market giving Japanese stocks a lower valuation. Since 2023, Japan** has completed its transformation from a valuation trap to a value depression, mainly due to the superposition of short-term cyclical factors and long-term structural changes. At the beginning of 2024, Japan **continued** the momentum, with the flagship Nikkei 225 and the TOPIX both one step away from their all-time highs in the 90s.
How can Japan** complete the transition from a valuation trap to a value depression? BOCOM International pointed out that the short-term cyclical factor is the recovery of exports and domestic consumption, and the long-term structural factor is that Japan is gradually emerging from deflation, superimposed on the substantive changes in corporate governance reform.
Specifically, in terms of short-term factors, in 2023, the sharp depreciation of the yen has significantly promoted the growth of Japanese exports and boosted the earnings growth of exporters, who account for a large proportion of Japanese-listed companies; In addition, the recovery of international and domestic tourism in Japan has also stimulated domestic consumption. In terms of long-term factors, after three decades of low inflation and even deflation, Japan will see inflation hit a new high in nearly 30 years in 2023, while wage growth will also hit a new high.
In terms of corporate governance, in March 2023, the Tokyo Stock Exchange took strong measures to require Japanese listed companies to disclose plans to improve their return on capital, especially for companies with a PB of less than 1, and if they cannot prove how to effectively use capital, ** will face the risk of delisting. This move has boosted and accelerated the actions of Japanese listed companies to increase shareholder returns, enhancing the attractiveness of Japan**. At the same time, as the world's only "cheap money", the sharp decline in the yen has also attracted overseas investors to borrow yen and invest in Japanese stocks.
What is the market outlook?
The reporter noticed that with the recent rise in Japan and the increase in investors' interest in Japan, many institutions have also released in-depth research reports on Japan and the 2024 Japanese investment strategy outlook report. Overall, many institutions are still optimistic about Japan** in 2024 and believe that the growth trend may continue, but some institutions warn of related risks.
Haitong International recently released its investment strategy for the Japanese market in 2024, and Haitong International continues to be optimistic about the Japanese market in 2024 and is more optimistic about the first half of the year.
Specifically, Haitong International believes that Japan's exit from deflation is expected to strengthen, the positive cycle brought about by the continuous wage is formed, and at the same time, a stable and controllable monetary policy is normalized. In terms of capital, it is necessary to pay attention to overseas long-term funds and domestic individual investors. In terms of industries, the industries that will outperform in 2023 include hardware (AI and semiconductors), automobiles, and materials, while the pharmaceutical, consumer and communication industries will be relatively underperforming. Looking ahead to 2024, Haitong International is bullish on the consumer discretionary, IT services, banking, pharmaceutical, hardware and electronics sectors.
BOCOM International believes that Japan** is expected to continue its growth in 2024, driven by continued reflation-driven corporate earnings and structural changes that Japan is closing the earnings gap with developed markets. At the structural level, BOCOM International believes that in 2024, the value style should be more worthy of investor allocation than the growth style.
It is worth noting that since the beginning of this year, many institutions have warned about the risks of investing in Japan.
For example, in a research report in late January, the strategy team of the League of Nations discussed whether Japan is currently facing the problem of overheating.
The strategy team of Guolian** pointed out that from the perspective of global comparison, compared with the mainstream market indices of some developed countries, at the beginning of 2023, Japan** has three advantages: excellent target, cheap assets, and low concentration, and its comprehensive "core competitiveness" is high. However, in the current context of Japan's continuous upward trend and global investors increasing their weight in Japan, its "core competitiveness" is weakening, or indicating that the short-term allocation cost performance is weakening. In addition, the RSI index (Relative Strength Index) also reflects the short-term volatility of Japanese stocks, a sharp increase in trading sentiment, or a period of overheating of Japanese stocks.
Zhang Jun, chief economist of Galaxy, and Yang Chao, a strategic analyst, also revealed the potential risks behind Japan*** in a research report in January. Galaxy ** believes that from a fundamental point of view, although the post-epidemic recovery of the Japanese economy is relatively weak, the upward trend of Japanese stocks is also supported by the expectation of economic improvement. In addition, the Bank of Japan maintained an ultra-loose monetary policy to provide support for ** liquidity, while foreign capital increased its position sharply, driving global capital to increase its holdings in Japan**.
However, Japan's upside has both economic and financial factors that could face a reversal in 2024, Galaxy noted. For example, the Federal Reserve cuts interest rates, Japan has expectations of exiting negative interest rates, and the appreciation of the yen can be said to be a high probability event. In addition, Japan's economic policy remains uncertain in 2024, and Japanese corporate returns have fully benefited from globalization, and Japan**, which has been growing steadily for a long time, is no more attractive than other emerging markets. Therefore, when investing in Japan**, Chinese investors need to fully consider the exchange changes between the RMB and the yen, and pay attention to the downside risk of the global economy, the risk of the weakening of the Japanese economy, the uncertainty of the timing and magnitude of the Fed's interest rate cut, the uncertainty risk of international geopolitical factors, and the risk of instability of Japanese market sentiment.
Editor-in-charge: Tactical Heng.
Proofreading: Wang Chaoquan.