Is The Nikkei 225 2016’s Big Stock Market Success? Good Day for Asian Equities

on Nov 22, 2016

Japan’s Nikkei 225 looked set to end its 4-day winning streak despite U.S. markets closing Monday at new record highs. Tokyo’s benchmark index dipped following a 7.3-magnitude quake in northeast Japan early Tuesday morning and it looked as though the Nikkei might be the day’s only Asian index to finish in the red. However, once investors had assessed the situation, the Nikkei quickly recovered the losses and a strong afternoon is seeing a likely finish up, with a current profit of 0.4% heading towards the session’s close.

Today’s story of resilience is not a one off, with the Nikkei 225 the developed-nation index that has shown the strongest performance in the months since it’s low for the year in June. Since then the Nikkei has gained 20%, riding the crest of a wave powered by a weaker yen, favourable BoJ monetary policy and the return of international capital. And it may be far from over with historical averages of bull trends in Japanese equities delivering 90% returns over 600 days. Money manager Bordier & Cie’s chief investment officer Bryan Goh commented:

_“A lot of things are lining up for Japanese equities. It looks like the economy is stabilizing and the weak currency is certainly helping. There’s some momentum behind this bull run.”_
Having been net sellers off Japanese equities over the year to September, $56 billion offloaded, international money manager are now rebuying. Naoki Lizuka, an equity strategist for Citigroup in Tokyo, believes that a combination of the yen staying weak to provide an earnings boost for exporters and international money managers becoming net buyers of Japanese equities would mean significant upside still to come.

The counter argument to this optimism comes from Binay Chandgothia at Principal Global Investors a money manager which looks after $402 billion and currently has a neutral position in Japanese equities:
_“My feeling is the rally isn’t linked to Japan itself. The movement is linked to evidence that global growth is getting stronger, the belief that trade will pick up, and the US dollar. The expectations are very low for Japan.”_
Major exporters have done well today for the Nikkei with Sony up 1.45% and Toshiba almost 2%. Konica Minolta is up 2.8% while Panasonic looks like finishing slightly down, with a 0.38% loss. Canon is up by 0.2%. Car makers Toyota and Honda have inverse results with the former registering a 0.8% gain and the latter a 0.88% loss. Nissan is also down by 1.39% and Mazda 2.18%.
Energy and commodities-exposed companies have had a positive day with Inpex up 1.7%, JX Holding 1.34% and Mitsui Mining & Smelting registering a strong 4.2% gain.
Elsewhere, despite light trading as news on the Hong Kong-Shenzhen stock markets link is waited on, the Hang Seng is up 1.34% to record its steepest rise in 12 days as energy and insurance companies recorded big wins. Following on from yesterday, insurers Ping An and China Life again saw strong gains on the expectation of interest rate rises in the U.S. next month. Ping An was up 0.78% while China Life has registered a 4.90% return for the day. Among the banks HSBC is up 1.23%, ICBC 2% and Bank of China 1.79%.
The big energy sector gainer was CNOOC, having added 4.21% with PetroChina up 3.27%. Macau casino-operator Galaxy Entertainment has continued its upward trend on the back of expectations of investment opportunities in Japan as the country prepares to issue casino licenses and has hit a 52-week high today. While the stock’s price subsequently dropped back it still gained 0.96% for the day.
In Singapore the STI is up 0.32% with Sembcorp Marine up a little over 4% and casino-operator Genting registering a 2.62% gain. The day’s biggest faller was Thai Beverage, down 1.14% while Oversea-Chinese Banking Corporation is down 1.02%.
Finally, to Australia, where the ASX has finished up 1.16%. Metals, mining and materials were the best performing sectors though the biggest gainer was accountancy software company Technology One, which registered an 11.13% gain after posting a forecast-beating 16% rise in full year profit. Orobre, the mineral resources company, also had a significant gain and finished the day up 9.87% and milk producer The a2 Milk Company gained 7.11% as sales of the company’s infant formula doubled. Media intelligence company iSentia Group was the day’s biggest faller, down 3.5%.

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