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| Pedestrians walk past a display showing the Nikkei Stock Average during an afternoon trading session at the Tokyo Stock Exchange in Tokyo, May 17. EPA-Yonhap |
By Lee Min-hyung
Retail investors are increasing their bets on the Japanese stock market, which has displayed an unexpectedly outstanding rally buoyed by exporters' stellar earnings thanks to a weak yen.
Data from the Korea Securities Depository (KSD) showed that Korean investors purchased $46.5 million (6.12 billion won) worth of Japanese shares between April 18 and May 19. This is an abrupt turnaround from the lukewarm performance of Japan's main stock index, the Nikkei 225, a month earlier. Investors here went on a selling spree of Japanese shares in February and March, but changed their positions last month on growing hopes of improved corporate earnings there.
In April, Korean stock investors purchased $490,000 worth of Japanese shares, and the figure is forecast to rise even more this month. The figure between May 1 and 19 reached $1.68 million, according to KSD data. The Nikkei 225 soared to the highest level in almost 33 years due to an increasing influx of foreign capital.
The stock rally was driven by Japan's ultra-dovish monetary stance. Unlike other major economies, the country has maintained a low benchmark rate even during the COVID-19 pandemic. This ended up weakening the valuation of the yen, thereby making Japanese product sold overseas more affordable. Expectations of continued earnings recoveries have been driving the stock rally there.
But market analysts urged investors to remain cautious on the Japanese stock market amid concerns over its short-term overvaluation.
"It is premature to say that the Japanese stock market can justify its recent rally," said Moon Nam-joong, an analyst at Daishin Securities. "Above all, uncertainties over the Bank of Japan's (BOJ's) monetary policy should be cleared away (to say that the stock market is not overheated). The BOJ's monetary policy committee left open the possibility of a policy pivot during its April meeting."
The analyst also said it is too early to forecast whether the recovery momentum of the country's stock market will be able to continue.
"Japan's stock index will display a certain trend from the third quarter of 2023, after the country releases its second-quarter GDP data," the analyst said. "Investors should reduce their portions of Japanese shares, in a strategic move against the short-term rally."
He also cited the previous movement of the Nikkei index as a reason behind the argument.
"Back in February 2021 and September of the same year, the Nikkei 225 failed to top the 30,000 mark. It is not too late to take action after figuring out whether the index has safely attainted the mark."
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