The main factors behind the rise in stock prices are a weak yen and substantial net buying by foreign investors
Starting from the April 4 low, the stock price rose to the level of more than one year after a holiday.
It rose to a level not seen in five months. After being sold off,
the stock price tends to rise in the following month,
being in an uptrend area, and the March quarter earnings
that exceeded expectations also acted to support the stock price.
We believe this also played a role in supporting the stock price.
Effect of a weaker yen
Of course, several factors overlapped to push up the stock price,
but if we pursue the point, the recent rise was mainly due to the
“yen depreciation” and the large net buying by foreign investors.
The dollar/yen exchange rate saw the Nikkei average bottom out on 4/17 around the low of 108.13 yen and
recorded a yen high, then reached a high of 114.37 yen on 5/11.
The yen’s swing during this period was 6.24 yen.
In the past year, in about a one-month period, when the dollar/yen rose by more than 5 yen
and the currency weakened, stock prices rose significantly. This time too, the move aligns with that data.
Further stock price gains would ideally accompany a further yen depreciation, but
if it can stay at 1 USD = 112–113 yen, the negative reaction to the stock price is expected to be limited.
Significant net buying by Foreign investors
We summarize the weekly foreign investors’ cash and futures trading differences since April.
(Foreign investors’ net trading difference, in billions of yen)
Cash Futures Total
~4/07 + 908 ▼2,997 ▼2,089
~4/14 +1,027 ▼ 558 + 468
~4/21 +2,770 ▼3,531 ▼ 760
~4/28 +2,849 +5,786 +8,636
~5/02 +1,583 +1,739 +3,322
Economic newspapers note that foreigners’ cash accounts were buying for five straight weeks
and that since April they turned to net buying, but in reality the futures accounts were net selling for seven straight weeks up to the third week of April, and during that period the cumulative net selling exceeded 1.583 trillion yen, greatly surpassing the cash net buying.
The shift to large net buying occurred in the fourth week of April,
and over the following two weeks, in seven trading days, foreigners bought a net total of 1.1958 trillion yen (about 170.8 billion yen per day).
In a weekly basis, there were nine weeks over the last year where net buying exceeded 500 billion yen (about 100 billion yen per day), and in all of them stock prices rose substantially.
The net buying in the fourth week of April, 863.6 billion yen, was almost as large as the 1.1618 trillion yen net buying in the week following the U.S. presidential election.
For stock prices to rise further, continuation of foreign net buying is a necessary condition. The key is held by foreign investors.
Key is held by foreign investors.
