2019年4月18日 星期四

Overseas companies - a selling market for Japanese stock in 2018, the first time in 31 years

Recently the Nihon Keizai Shimbun On-line reported the following:
海外勢、日本株31年ぶり売越額に 18年度
2019/4/4 18:00










Overseas investors were increasing selling Japanese stocks. The amount of sales in fiscal year 2018 was about 5,630 billion yen, a 31-year high.  Against the background of a US-China trade war and other factors caution about the future of the world economy was becoming strong. However, the Bank of Japan (BOJ) offset it by buying in almost the same amount (approximately 5.65 trillion yen) and buying and selling were offsetting each other. The imbalance picture that the BOJ singled-handedly taking up the sale from foreigners was clear at a glance.

Based on investment trends worked out by investment sector announced on the 4th by the Tokyo Stock Exchange, the recent amount of overseas sales had been high, counting from since 1987 when Japanese stocks continued to rise with a bubble economy in earnest. The selling out was two years in a row.

The biggest factor behind the foreigner’s sale was an alert to a slowdown in the global economy. There were many export-type manufacturers in Japanese stocks, and they were easily influenced by trends in the global economy. With an uncertainty in the outlook such as the US-China trade war and the slow going of the Chinese economy, there had been a series of cases where foreigners had scaled down the decision to invest in Japanese stocks.

BlackRock, the world's largest asset manager, changed the stance on Japanese stocks from "bully" to "neutral" in July 2018 for the first time in about one year and eight months.

State Street Global Advisors, the third largest asset manager in the world, had from October to December 2018 reduced the investment ratio of stocks with risky asset for reasons such as lack of a clear path to resolve the US-China trade war.  Among them, they also lowered their investment judgment on Japanese stocks from "neutral" to "slightly bearish" after 2019 because of a risk of yen appreciation.

The Bank of Japan absorbed these foreign sales by buying in the Japanese stock exchange-traded funds (ETFs). The Bank of Japan began buying ETFs in 2010 when the Nikkei average was generally below 10,000 yen,  it served the aim as " a premium for risks reduction." The initial purchase amount was 45 billion yen. It announced a policy to set it at 6 trillion yen in 2016.

The total amount of ETF purchases by the BOJ amounted to 5.65 trillion yen in FY2006. The balance of holdings was estimated to be about 29 trillion yen as of the 3rd, representing nearly 5% of the market capitalization (about 600 trillion yen) of the First Section of the Tokyo Stock Exchange.

The Bank of Japan boosted asset prices and stimulated consumer spending through large-scale purchases of ETFs and it was expected to lead to a rising prices of commodities. However, the exceptional policy that a central bank directly supported share appreciation was also risky.

In March, the National Bank of Japan Deputy Governor Masatoshi Amamiya stated in the National Assembly that "If the Nikkei Stock Average falls below about 18,000 yen, the market value of ETFs held will fall below the book value." Although there was still a distance from the current market level, yet once the stock market turned into a downturn the BOJ's equity capital could be damaged, and currency confidence might also fluctuate.

     So, the Japanese government is directly supporting the share prices of many Japanese companies.