Japan Inc. still has additional upside; NIKKEI225

2018.10.6
NIKKEI225
Closed at 23,783.72 (-0.80%) Target to 26,000.00 (+9.32%)
Indices
S&P500 2,885.57 (-0.55%)
NASDAQ 7,788.45 (-1.16%)
HangSeng 26,572.57 (-0.19%)
10y JGB 0.158% (-0.004%)
USDJPY 113.72 (-0.01%)
1. Rising market yields of US are attacking global stock markets. During this week, market yield of 10y US T-Note touched 3.20%, piercing the ceil eventually. Additional rising could be possible with accumulated instincts to sell the security. I believe, however, that volatilities in the stock markets are just temporary. While some TMT companies like Netflix (NFLX.NASDAQ), Comcast (CMCSA.NYSE) or Facebook (FB.NASDAQ) which are in the center of concerns could face additional sell, momentum for other stocks looks like not dead yet. Rising oil price, strong job markets in developed countries or signs of central banks’ tries to get soft-landing from the largest QE ever in history, all support additional upside for equities. As I have suggested, Japanese equity market has been the most hopeful market, and still does. Unlike Hangseng or KOSPI which are back to the lowest point, Japanese market is preserving its highest point: closing to 24,000.
2. Weakening JPY will be continued. At October 4, USDJPY spot touched 114.55 temporarily, but it’s now between 113 and 114 because of the plunge of global stock markets. The weakening catalysts for the currency still live, however. Yield of JGB is rising, but it’s still very low level: it’s lower than 16bp now, and its upside is limited strongly with pronouncement of BOJ which determined limit of the yield to 10bp as its ceil. Even if actual yield of 10y US T-Note is -10bp for Japanese or European investors who use swaps to hedge risk, one of elemental principles in Macro-Economics are still alive: the higher interest rate gives the higher worth to the currency. US dollar index touched 95s again, and rise of JPY is limited.
3. Other factors which I suggested in my last report are still alive. Other factors mean the best economic fundamental, growing corporates’ profits and favorable FX environment. And its competitive edge compared with the competitive DM is still valid too. European markets are still struggling with its own problems like Italian fiscal argument with Brussels, Brexit or rising oil price.
4. I believe NIKKEI225 have additional upside targeting 26,000. Hangseng and KOSPI200 looks like stuck in box-pattern, 26,000 – 28,000, 290 – 300 respectively. On the other hand, NIKKEI225 got additional catalyst targeting upside movement, piercing the ceil of the box. I believe the competitiveness of Japan Inc. will lead the index to 26,000.
Mr. Banker, http://markety.tistory.com

NIKKEI225 (October 6).pdf