The Bank of Japan decided to raise interest rates again at the monetary policy meeting on July 31. At the same time, the Bank of Japan announced a plan to reduce the amount of long-term government bond purchases. Subsequently, in three days in early August, the Japanese stock market set a record, and the market value directly evaporated as much as 1.1 trillion. Dollar.
Subsequently, the Bank of Japan stated that it would not tighten monetary policy too quickly to avoid further market turmoil. This move effectively curbed the sudden appreciation of the yen and temporarily eliminated a major threat to the rise of the Japanese stock market.
What has been falling since June? Semiconductors, artificial intelligence concepts, bank stocks…
According to Bloomberg , the stocks that were most affected this time were the groups that had experienced the largest gains. After prices fell sharply, further lowering valuations, the attractiveness of Japanese stocks in the international market has increased.
In fact, the Topix has fallen 12% since the end of June. Stocks that outperformed earlier this year have taken a bigger hit, especially semiconductor and bank stocks. Japanese semiconductor-related stocks, which have surged on the artificial intelligence boom, have fallen 25% in the period, while bank stocks, which had soared on expectations of rising interest rates, have also fallen 16%, according to an MSCI index.
In response to this sharp drop, Commons Asset Management Inc. CEO Tetsuro Iizuka pointed out that this drop does not mean that the market is facing a major economic or financial crisis. He said:
It may only take two to three months for the market to fully recover. Investors have now realized that the monetary policies of Japan and the United States are entering a new stage, which has also become an opportunity for them to adjust excessively concentrated investments.
Is it worth getting in after the bubble bursts?
Despite the recent decline in Japanese stocks, the Japanese market remains a popular market for global traders, with inflation set to pick up this year as prices and economic growth stagnated after more than two decades of deflation. The Japanese stock market is therefore highly anticipated by some analysts.
In addition, in the context of the Tokyo Stock Exchange's push for companies to increase shareholder returns, Japanese companies have also become the focus of investment. These factors make the stock price correction more attractive to overseas investors, especially world-famous investors like Buffett. , he has invested in Japanese trading companies in the past.
Currently, the Topix's expected price-to-earnings ratio is 13 times, far lower than the S&P 500's 20 times. The price-to-earnings ratio of the Japan Semiconductor Index fell to 21 times from 35 times earlier this year, further demonstrating the potential attractiveness of the market. Last month, the market rally made many people feel that it was overdone, but with the recent sell-off , the stock market has gradually returned to a reasonable valuation level, Masayuki Murata, general manager of the Balanced Portfolio Department of Sumitomo Life Insurance Company, said:
At current valuations, it's safe to say we're at a buy-on-the-dip level.
Bloomberg: Need to pay attention to Sino-US relations and the US presidential election
However, Bloomberg reported that the market still faces risks, and the possibility of further tightening by the Bank of Japan and easing by the Federal Reserve may lead to a stronger yen. Previously, the yen's fall to multi-year lows has helped drive stock markets higher because it is cheaper The yen boosted overseas profits for Japanese exporters.
At the same time, geopolitical tensions, especially friction between the United States and Beijing, remain an important factor affecting the market, especially as the U.S. election approaches, which may have a further impact on technology stocks, which began last month. These various tensions have taken a toll on technology stocks.
In terms of the Japanese version of the "fear index," the Nikkei Volatility Index closed at 45 on Friday. Although it was lower than Monday's intraday high of 85, it was still well above the long-term average of around 22, showing Market sentiment remains highly volatile.
