Japanese stocks are rising. What’s behind the wave?

Text size

On Tuesday, Japanese stocks reached their highest levels in 31 years. Of course, global markets are in a good mood as investors continue to be bullish on the continued economic recovery. But the world economy also serves Japan well.

He

Nikkei 225

rose 714 points, or 2.7%, on Tuesday. The index stood at 27,568 and briefly touched 27,601, the highest level the index has reached since 1989.

Other global stocks appeared on Tuesday, but less so. He

Asia Dow

index closed 1.6%, the

Hang Seng

The index increased by 1% and the

Stoxx Europe 600

the index rose almost 1%. The US stock market has been operating in recent trading sessions, but stopped briefly on Tuesday with the

Dow Jones industrial average

they drop about 100 points in the noon negotiation. While cases of Covid-19 continue to rise worldwide, fiscal stimulus measures are supporting consumers and businesses, and various biotechnologies are on track to massively distribute vaccines.

But some recent developments stand out for the Japanese economy and markets. Nikkei companies are exposed to the right geographies and sectors to benefit from developments.

Fiscal stimulus in key areas around the world is being put in place. The United States approved a $ 900 billion tax stimulus bill that will provide assistance to individuals and small businesses. South Korean President Moon Jae-in confirmed a third round of direct payments, amounting to 9.3 billion won, or about $ 8.5 billion, to individuals and small businesses coming out in January. Nikkei 225 companies see on average about 13% of their revenue from the U.S. and 2.8% from South Korea.

This is more exposed than other indices in the world. Hang Seng index companies see 3% of U.S. revenue and almost nothing from South Korea. Stoxx 600 companies see nearly 20% of U.S. revenue, but only 8% of the index corresponds to consumer cycling cycles, which will benefit as the economy recovers and consumers return to pre -pandemics (or higher) spending. This exposure is another of Nikkei’s keys: approximately 18% of Nikkei 225 companies are cyclical consumer companies.

In addition, Japan is an export-oriented country that wants its currency to be relatively weak to make its exports globally competitive. However, the yen has strengthened against the dollar and the renminbi, both of which are used to buy Japanese exports. Still, the wind against Japan’s currency is being overcome by the enlightened global economic environment, according to Quincy Krosby, market strategist at Prudential Financial. De Barron.

Japan’s recent strength has attracted notable investors. Warren Buffett, for example, 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, has cited Japan’s monetary policy as one of the country’s main bullish market forces, an opinion he reiterated 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 he buys stocks, bonds and ETFs as fast as he can Rogers wrote in an email saying he owns Japanese ETFs.

Rogers says it helps Japan have a new government, led by Prime Minister Yoshihide Suga. “New governments always do things to make people happy. This is no different. “

Write to Jacob Sonenshine to [email protected]