Signs are emerging that Japanese retail investors are getting on the equity bandwagon after having largely missed out on a historic rally.
(Bloomberg) — Signs are emerging that Japanese retail investors are getting on the equity bandwagon after having largely missed out on a historic rally.
Their buying could help Japanese stocks regain some of the upward momentum that was lost over the past two weeks due to a stronger yen and concerns the Bank of Japan will tweak policy later this month.Â
Foreign funds have done most of the heavy lifting to bring the market to a 33-year high, betting the nation will beat deflation and continue corporate reforms that boost shareholder returns. During that period, many domestic investors stayed on the sidelines, unconvinced that higher inflation is sustainable.
Here are three charts that show retail investors are warming up to the market:
Retail investors turned net buyers in the first week of July, purchasing the most stocks since March, when Japanese equities began a four-month surge. Foreign investors, meanwhile, acquired just a fraction of that amount, according to data from the Tokyo Stock Exchange.
Margin buying, often used by individual investors to increase leverage, is piling up. The net value of Japanese shares bought through margin transactions rose to the highest level since December 2021 as of last week.
The market value of Next Funds Nikkei 225 Leveraged Index ETF, which doubles the return of the Nikkei and is popular among retail investors, has risen about 45% since bottoming out on June 8 as more shares were issued.
Still, individual investors remain cautious in the medium to long term, according to Masahiro Yamaguchi, senior market analyst at SMBC Trust Bank Ltd. They’ve been repeatedly disappointed by previous rallies, and need more confidence that this time, things will be different, he said.
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