Japanese shares touched a 34-year peak yesterday, as foreign investors continued to flock to the market, attracted by low valuations, changes in corporate governance and a weak yen that has made Japanese companies' products more attractive globally.
The Nikkei 225 index climbed 2.89 percent to close at 37,963.97, hitting its highest since January 1990, after briefly breaching 38,000 points, while the broader TOPIX rose 2.12 percent. The Nikkei has gained more than 13 percent so far this year, after rising 28 percent last year.
"US yields have moved up year to date," HSBC Holdings PLC chief multi-asset strategist Max Kettner said. "In the absence of any kind of meaningful tightening from the Bank of Japan that really hurts the Japanese yen, (which) helps the export-sensitive Japanese equity market."
Photo: Franck Robichon, EPA-EFE
The Japanese yen, which is sensitive to US rates, was last down around 0.2 percent at 149.67 per US dollar, not far from the closely watched 150 level that analysts said would likely trigger further comments from Japanese officials in an attempt to support the currency.
Japan's currency has fallen around 6 percent against the US dollar this year as investors have pushed back their expectations for when the Bank of Japan will end its ultra-loose monetary policy.
Separately, investors are going “all in” on US technology stocks as they turn the most optimistic about global growth in two years, according to a survey by Bank of America Corp (BofA).
Allocation to tech is now at the highest since August 2020, the global survey of fund managers showed. Exposure to US equities more broadly has also risen, while easing macro risks prompted investors to trim cash levels by 55 basis points from last month.
Previous such declines in cash levels were followed by stock market gains of about 4 percent in the following three months, BofA strategist Michael Hartnett wrote in a note.
Technology companies, which generally benefit from lower interest rates, have led US stocks to a record high this year, with the NASDAQ 100 heading for a fourth straight month of gains. But the rally has left the benchmark S&P 500 in so-called overbought territory, which some market participants consider a precursor for declines.
Hartnett said in the note on Tuesday that overly bullish investor positioning was increasingly becoming a contrarian headwind for risk assets.
About 41 percent of participants said they expect large-cap growth stocks to drive equity markets, while 18 percent indicated gains would be fueled by small-cap growth stocks, the survey showed.
The survey was conducted between Feb. 2 and Feb. 8 and canvassed 209 participants with US$568 billion in assets under management, according to BofA.
Additional reporting by Bloomberg
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