An inflow of funds into Japanese value stocks amid rising rates has made the nation’s equities less dependent on moves in US peers.
(Bloomberg) — An inflow of funds into Japanese value stocks amid rising rates has made the nation’s equities less dependent on moves in US peers.
The correlation coefficient between the Topix and the S&P 500 Index has fallen into negative territory. The closer the correlation coefficient approaches 1, the stronger the tendency to move in the same direction, and the closer it approaches minus 1, the opposite tendency is indicated.
Masanari Takada, a quantitative strategist at JPMorgan Securities Japan Co., said investors have become more interested in value stocks, which account for a larger proportion of the market in Japan than in the US.
While value has drawn interest globally amid rising interest rates, it has drawn particular focus in Japan due to the Tokyo Stock Exchange’s campaign for higher price-to-book ratios and news that Warren Buffett is looking to buy more of the nation’s stocks.
Buffett’s Focus on Quality Helps Narrow Hunt for Value in Japan
Masahiro Yamaguchi, senior market analyst at SMBC Trust Bank Ltd., said upcoming results could help “close the gap” in correlation again. US stocks have already factored in weak earnings and cautious company guidance, while Japanese stocks have yet to do so, he said.
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