Nikkei News reported that Berkshire Hathaway, owned by the stock god Warren Buffett, will issue a total of 122 billion yen in Japanese yen bonds. The interpretation from various sectors is that it may increase its holdings in trading companies or buy bank and automobile stocks. Toyota, one of the three major financial groups in Japan, is expected to continue to guide international funds into Japanese stocks. In addition to the expected influx of funds, it also heralds a new era of emphasis on both US and Japanese stocks.
Official policies are driving mild inflation in Japan, and the weak yen is helping boost the Japanese economy. Coupled with strong performance in domestic corporate financial reports, the Nikkei Stock Average has been rising for three consecutive weeks since November. On November 24th, the Nikkei 225 Index reached a new high for this year’s closing price. Leading companies such as Toyota and Tokyo Electron have reached historical highs in their stock prices. The Nikkei Stock Average has risen by 30% this year, and international funds continue to be optimistic about future prospects. Buffett’s issuance of bonds again paves the way for increased investment in Japanese stocks. Analysts at Daiwa Securities speculate that besides increasing investments in five major trading companies, banks and automobile manufacturers are likely to be his next targets.
According to Bloomberg data, foreign investors’ net selling turned into net buying for Japanese stocks since earlier this year; they bought over 2.7 trillion yen worth of shares on Japan’s stock market in October alone – making it the third-largest monthly inflow amount so far this year – bringing their cumulative net purchases up to 3.3 trillion yen which continued flowing into November.
Despite strong capital inflows, global managers still see significant room for further investment growth potential within Japanese equities market; according to Bank of America’s Global Fund Manager Survey conducted last month: currently most crowded trades include long positions in large US tech stocks such as Apple, Microsoft, and Nvidia; followed by short positions in mainland Chinese equities and long positions in US short-term bonds. Only 6% of managers believe that Japanese stocks are overcrowded. At the same time, when it comes to the three major mature markets – the United States, Eurozone, and Japan – global fund managers’ allocation to Japanese equities has reached a new high since March 2018 with a net proportion of 23%, far exceeding that of US and European stocks.
Institutional investors point out that recent positive factors continue to stabilize confidence in international capital inflows into Japanese stocks. The possibility of Japan adjusting its loose policy stance in the near term is low due to moderate economic growth limiting upward pressure on Japanese government bond yields while maintaining a weak yen. With policy catalysts coupled with benefits from leading manufacturing industries for exports and economic recovery-related sectors, all these factors have become focal points for this wave of activity within the Japanese stock market.
Domestic funds are also following this trend by expanding their investments into Japanese stocks alongside their core holdings in Taiwanese and American assets. In July this year, Yuanta Securities launched Taiwan’s largest Japanese stock fund called “Yuanta Japan Leading Companies Fund.” As of late October, its major holdings included Toyota (which possesses key technologies for new energy vehicles) among other automotive industry leaders; Tokyo Electron (a semiconductor equipment manufacturer); Mitsubishi UFJ Financial Group (Japan’s largest financial group); Mitsui & Co., one of the five major trading companies.