Friday, October 25, 2013
STOCK FOCUS: Japan Stocks May Rally After Earnings Reports
TOKYO (NQN)--Tokyo stocks fell back Friday, with the Nikkei Stock Average sliding 398.22 points to end the day at 14,088.19.
Though investors were buying shares of companies with strong earnings, such purchases had limited impact on the overall market. Additionally, it may be late fall before overseas investors seriously begin buying Japanese stocks again.
According to data released Thursday by the Tokyo Stock Exchange, overseas investors were net buyers of Japanese stocks through Oct. 18 to the tune of 10.44 trillion yen, surpassing the net purchase of 10.32 trillion yen logged in 2005 when Junichiro Koizumi was prime minister.
Meanwhile, Japanese investors are selling stocks, with retail investors' net sales topping 7 trillion yen. They are locking in gains from the market's steady uptrend since fall last year, when Shinzo Abe, then president of the Liberal Democratic Party, unveiled the economic policies he would implement if his party won the general election in December.
Continued selling by domestic investors -- mainly institutional investors including life and nonlife insurers and pension operators -- is also due to the tax break on stocks expiring at the end of this year. According to life insurers' investment plans for the second half of fiscal 2013, those firms are unlikely to increase their purchases of Japanese stocks.
Because there are few aggressive buyers in Japan, the Japanese market will likely be affected by overseas investors, whose expectations for the prime minister's economic policies led the market's recent rise. Net buying by foreign investors may hit another record high soon, which would support the market. If their stock buying slows, however, downward pressure caused by selling on the part of Japanese investors may become the dominant trend.
Japanese stocks will probably start regaining their strength from late November. Norihiro Fujito, head of investment information at Mitsubishi UFJ Morgan Stanley Securities Co., thinks trading may become active again after overseas mutual funds and overseas hedge funds finish announcement of their earnings in October and late November, respectively.
After major Japanese companies finish releasing their earnings for the first half of fiscal 2013 through September, Japanese stocks may be seen as undervalued. Fujito said the Nikkei Stock Average's price-earnings ratio for fiscal 2013 is estimated at 14.6 based on the average estimate by market analysts for the current fiscal year's earnings per share among stocks listed on the Tokyo Stock Exchange. The price-earnings ratio for U.S. S&P 500 Stock Index is estimated at 15.8. In Spain and Italy, the ratios surpass 16. If earnings of Japanese firms rise as expected, Japanese stocks will be increasingly seen as undervalued, and they may attract buyers again just as they did last fall.
-- Translated from an article by NQN staff writer Atsushi Otani
(Nikkei Quick News, Oct. 25)