Weak Yen Fuels Japan’s 2023 Equity Rally During Foreign Demand

(Bloomberg) — One of the world’s biggest share market rallies this year in Japan may be extended if foreign investors become even more bullish in 2024. (Bloomberg) — One of the world’s biggest share market rallies this year in Japan may be extended if foreign investors become even more bullish in 2024. The Topix index and the Nikkei 225 Stock Average both touched 33-year highs and rose more than 20% so far for 2023, beating most equity benchmarks in the rest of Asia.

Gauges that track Japanese automakers and electronics companies surged at least 33% as the yen depreciated against all major currencies. That was fueled by signs that the Bank of Japan isn’t in a hurry to alter its ultra-loose monetary policy. Even with the yen’s rally since early November, Japanese stocks may stay solid given that the currency remains relatively cheap and corporate earnings have become less susceptible to foreign exchange fluctuations.

Overseas investors have also cheered Japan’s push to increase companies’ shareholder value. “Investors outside of Asia, such as those in the US, Europe, and the Middle East, are also interested in Japanese equities,” said Masashi Akutsu, chief equity strategist at BofA Securities in Tokyo. “If they are really convinced that Japan will improve, they will raise their rating, and then funds will come in line with the fundamentals.

” Foreign investors were net sellers for only three months this year as of November, according to data calculated by the Tokyo Stock Exchange. Other sector winners included trading companies that climbed after billionaire Warren Buffett increased his stake in the sector’s largest firms. Among the Topix’s 33 sub-indexes, pharmaceutical companies were the only group to decline this year after a series of clinical trials faced setbacks.

WATCH: Belita Ong, chair of Dalton Investments, shares her views on Japanese stocks and the country’s central bank. (Dec. 19)Source: Bloomberg Here’s a list of some notable sectors: Semiconductors Shares of Screen Holdings Co.

have surged 172% this year, making it one of the Nikkei 225’s best performing stocks, while Advantest Corp. and Renesas Electronics Corp. both more than doubled.

Semiconductor-equipment suppliers have been in focus as Taiwan Semiconductor Manufacturing Co. considers building a third plant in Japan, which is pushing to use extra budgeting to support chip infrastructure. Analysts have also pointed out that semiconductor-equipment suppliers are seeing signs of a recovery.

Japan Chip Stocks Rise to Record on Signs Demand Is Recovering Automakers The automobile sector made the list of top performers as the yen depreciated in November to a one-year low of 151. 91 per dollar, helping exporters post record earnings. The Topix subindex for car companies is set for a year-to-date gain of 36%.

Toyota Motor Corp. is on course for its best year since 2013 with a gain of 40%. Trading Companies The five trading firms that Buffett favored earlier this year — Mitsubishi Corp.

, Mitsui & Co. , Sumitomo Corp. , Marubeni Corp.

and Itochu Corp. — are all up at least 35% since a report in April said he raised holdings in the sector. Investors are watching for what he buys next after Berkshire Hathaway Inc.

sold yen bonds in November. The Topix’s Wholesale Trade index, which includes those companies, has climbed more than 37% this year. Berkshire Sells Yen Debt Amid Talk It’s Eying More Japan Stocks Pharmaceuticals A slew of bearish signals emerged from the pharmaceutical sector, the year’s only Topix’s sub-index loser.

Those included a more-than 50% slump in Sumitomo Pharma Co. that made it the biggest decliner in the Nikkei 225. In July, the drugmaker and Otsuka Pharmaceutical Co.

said their schizophrenia treatment Ulotrant didn’t meet the primary endpoint in phase 3 Developing Innovative Approaches for Mental Disorders 1 and 2 clinical studies. Eisai Co. also lost 20% this year after a Keytruda trial to treat a type of cancer in the uterus didn’t meet the dual primary endpoints of overall survival and progression-free survival.

“Going ahead, I think investors need to be very picky for Japan health-care sector,” said Tina Banerjee, a health-care analyst who publishes her insights on the Smartkarma platform, based in Mumbai. “Companies with promising late-stage pipeline should be the winners. ” More stories like this are available on bloomberg.

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