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A pedestrian looks at an electronic stock board that displays the stock of the Nikkei 225 in Tokyo.
Kiyoshi Ota / Bloomberg
Japanese equities reached their highest levels in 31 years on Tuesday. Of course, global markets are in a good mood, as investors continue to be optimistic about the continued economic recovery. But the global economy also serves Japan well.
Nikkei 225
rose 714 points, or 2.7%, on Tuesday. The index stood at 27,568 and briefly reached 27,601, the highest level the 1989 index has ever reached.
Other global actions emerged on Tuesday, but less.
Asia Dow
the index closed at 1.6%,
Hang Seng
The index increased by 1% and the value
Stoxx Europe 600
the index increased by almost 1%. The US stock market has been operating in the last few trading sessions, but took a short break on Tuesday with
Dow Jones Industrial Average
decreased by about 100 points in trading at noon. As Covid-19 cases continue to grow worldwide, tax incentives are supporting consumers and businesses, and more biotechnology is on the way to mass distribution of vaccines.
But some recent developments stand out for the Japanese economy and markets. Nikkei companies are exposed to the right geography and sectors to benefit from developments.
Fiscal stimulus in key areas around the world is beginning to be buried. The US has passed a $ 900 billion tax incentive bill that will help individuals and small businesses. South Korean President Moon Jae-in has confirmed a third round of direct payments, worth 9.3 billion won, or about $ 8.5 billion, to individuals and small businesses coming out in January. Companies on the Nikkei 225 see on average about 13% of their revenues in the US and 2.8% in South Korea.
It is more exposed than other indices in the world. Hang Seng index companies account for 3% of US revenue and almost nothing in South Korea. Stoxx 600 companies account for nearly 20% of US revenue, but only about 8% of the index is in consumer cycles, which will benefit as the economy recovers and consumers return to pre-pandemic – or higher – spending levels. This exposure is another key for Nikkei: about 18% of Nikkei 225 companies are cyclical consumer companies.
Moreover, Japan is an export-oriented country that wants its currency to be relatively weak in order to make its exports globally competitive. However, the yen strengthened against the dollar and the renminbi, both of which were used to buy Japanese exports. However, the currency wind for Japan is outpaced by the thriving global economic environment, said Quincy Krosby, chief market strategist at Prudential Financial Barron’s.
Japan’s recent power has attracted remarkable investors. Warren Buffett, one, made a surprising bet on the country in September.
Jim Rogers, a Singapore-based investor who co-founded the legendary Quantum Fund with George Soros, cited Japan’s monetary policy as a major force in the country’s bull market – an opinion he reiterated on Tuesday. “The head of the Bank of Japan goes to work early every morning like a good Japanese bureaucrat and prints money (” unlimited “is his word) as fast as he can. Then buy stocks, bonds and ETFs as fast as he can, ”Rogers wrote in an email. He said he owns ETFs in Japan.
Rogers says he is helping Japan have a new government led by Prime Minister Yoshihide Suga. “New governments are always doing things to make people happy. This is no different. “
Write to Jacob Sonenshine at [email protected]