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2018.9.3 |
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NIKKEI225 | |
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Closed at 22,865.15 (-0.02%) Target to 24,000.00 (+4.96%) | |
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Indices | |
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S&P500 2,901.52 (+0.01%) | |
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NASDAQ 8,109.54 (+0.26%) | |
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HangSeng 27,888.55 (-0.98%) | |
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G 10y 0.107% (-0.004%) | |
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USDJPY 110.86 (-0.47%) | |
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1. The index is trying to overcome its slump. I believe that among developed markets except US, Japanese market has the highest upside in this point. Let see in fundamental side. Prominent reason of the slump has been concern over trade war between US and the rest of the world. But the concern is being released nowadays with president Trump’s negotiations with EU, Mexico and Canada. His main target looks like China. At Thursday of this week, his administration announced the possible additional levies on Chinese imports. Japan and the other countries aren’t the main target, so there will be no devastative impact for the measures. Of course, there are intermediate goods which Chinese manufacturers are buying from Japanese corps to make goods, but the impact will be limited. Actually, the trade-war between the largest two economies is proceeding already. But net profits from listed 1,588 companies in Japan during 2Q this year, increased 27.9% compared with those during same time last year. Let see increasing rates of operating profits for representative companies in the region: Toyota +19%, Hitachi +12.4%, Panasonic +19.2%, MUFG +8.9% (ordinary income). The release is being reflected in regional stock market too. At Friday of this week, NIKKEI225 started with -0.6%, but ended with -0.02% while HangSeng in HongKong ended with 0.98%. | |
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2. Reverse correlation between the index and USDJPY will be giving advantage to the investors. As I suggested at another report, I believe USDJPY will be reversed to weak stage in near future. In now, there is a point I want to change in the report: market participants are starting to think differently about Japanese real economy. At Thursday when US administration implied additional tariffs on Chinese imports, Japanese stock market ended with minus 0.02% at next day. It was much more released reaction compared with the past. But still, this doesn’t give upside to JPY. Even though I told USD stole the status of the safest currency from JPY, JPY is still one of the safe assets which would be going down with good news. In this side, good news for Japanese economy will be stimulus for decrease of JPY. Let see another important factor for value of currency: interest rate. Even though yield of 10y JGB has been up to level of 0.10%, the number is still hyper-low. We can’t expect the additional rise because BOJ pronounced that allowable range is plus-minus 0.10%. And yen-denominated assets aren’t recognized as safe assets in this point as they used to be before. Dollar-denominated assets have taken the status with shortage of USD in EM like Turkey, Argentina or South Africa. Upside for JPY is limited strongly, and this would be another reason why NIKKEI could be rallying additionally. | |
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3. It is much more attractive than Europe market is, and would be good alternative for US market. Nowadays, everyone worries about the strongest US stock market, even though S&P500 and NASDAQ keep recording new high-points continuously. I believe the US market has additional upside, but if you don’t think so, Japanese market would be exceptional alternative for the US market. Unlike Europe market where investors are suffering with geopolitical issues about Turkey and Italy and regional bank problems, Japanese market is recovering its status as stable DM market with releasing global trade issue. Let see the chart for Japanese and Europe markets. The directions of those two had not been that different until early-Aug, but have diverged since mid-Aug. Slump of Europe has still long way to go, but Japan is relatively free from the slump. Its feature as DM could cut impact from the downfall of HangSeng more or less, and the country’s exposure to Turkey is limited to retail investors which haven’t given huge impact to the regional stock market since the explosion. I think Japan is only DM which will follow to US market, and in valuation, the market is much more attractive than the US market is. | |
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4. I believe NIKKEI225 have enough upside targeting 24,000. With the prospect for weak JPY, the releasing trade-tension stimulated from US and the most attractive appearance among DM, NIKKEI225 would keep its upside trend, and reach to 24,000 in near future. 24,000 is just first target, and I think additional rise possible. | |
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Mr. Banker, http://markety.tistory.com | |
NIKKEI225 (Sep 3).pdf