TSE Cash Markets

Institutional investors around the world are increasing their allocations to Japanese equities. The October institutional investor survey conducted by Bank of America (BofA) in the US showed the first “bullish” level of investment allocation to Japanese stocks in five years. Some believe that institutional investors, who became more interested in the rising price of Japanese stocks after the spring, have actually invested in the market after conducting market research.

BofA published the report on 17th. The survey was conducted from 6th to 12th, with 295 INSTITUTIONAL INVESTORS participating overall. The difference between the percentage of respondents who rated Japanese stocks as “I’m overweight” minus those who rated them as “I’m underweight” was 16%, up 6 points from the previous month and the highest level in 5 years since October 2018.

Hyohachiro Okamoto, chief foreign equity consultant at Monex, says, “Many of the foreign institutional investors who became interested in Japanese equities after the spring may have made their first actual investment in Japanese equities, and it is possible that they have finally invested in Japanese equities at this point in time after conducting research on the Japanese stock market and individual stocks.”

The yen’s ongoing depreciation in exchange rates also had an impact. The dollar-denominated the Nikkei 225, which foreign investors are said to focus on, hit $204.56 on 4th, the lowest level since March 20 ($204.39). It has been pointed out that it was easy to move to expand investment due to its undervaluation when viewed in dollar-denominated terms.

BlackRock, the world’s largest asset manager in the US, raised its investment decision on Japanese stocks one step from “neutral” to “overweight” in September. The company explained, “Strong growth could allow profits to exceed market expectations. Stock buybacks and investor-friendly corporate behavior may continue to attract interest from foreign investors.”

The survey also highlighted a deterioration in market sentiment. The percentage of investors expecting “Hard landing” for the global economy over the next 12 months was 30%, up 9 points from the previous month. The percentage of respondents expecting “Soft landing” and the economy to remain strong “no-landing” was 64%, down 10 points from the previous month.