In the third week of the new year, the frenzy in the Japanese stock and bond market continues
Market data shows that driven by the rise of shipping and financial stocks, the Nikkei 225 index further rose strongly above 36000 points in Monday afternoon, and has crossed four thousand point integer levels since the beginning of the year. At the same time, with the expectation that the Bank of Japan is expected to postpone the process of interest rate increase becoming stronger, the price of Japanese treasury bond bonds of all maturities also rose, and the yield of two-year Japanese bonds fell back to negative value for the first time since July last year.
Is the Nikkei breaking through the thousand point mark like "exploring a bag to extract things"?
Last week, the Nikkei 225 index hit its best weekly performance in 22 months, and at the beginning of this week, the upward trend of Japanese stocks clearly showed no signs of stopping. At the close of Monday, the latest trading of the Nikkei 225 index was at 35901.79 points, with a intraday increase of nearly 1%. At one point during the day, it rose above 36000 points, marking the first time since February 1990.
The Tokyo Stock Exchange Index, which has lower technology equity, closed up 1.22% and also hit a 34 year high during trading.
From the specific sectors that rose, as the tense situation in the Red Sea pushed up shipping prices, the Tokyo Stock Exchange Shipping Stock Index surged by more than 5% on the day, ranking first among the 33 sub sectors. Financial stocks, which experienced a significant decline last Friday, also rebounded strongly within the day - the brokerage stock index rose 4%, and banking stocks rose more than 2%.
Although some technical indicators have already issued overbought signals, many Japanese stock bulls seem to be indifferent at the moment. At present, the relative strength index (RSI) of the Nikkei 225 index has climbed to over 76, with over 70 usually indicating overbought in the market.
Nomura Securities strategist Kazuo Kamitani said that the Nikkei index has shown a surprising upward trend, although he expects the market to adjust in some form to the recent rebound speed this week, the decline in US bond yields and the trend of the yen exchange rate still boosted overall confidence.
From the news perspective, the Tokyo Stock Exchange will release a monthly list of companies that have disclosed plans to increase shareholder value starting from Monday's close, which is expected to bring new impetus to Japanese stocks. Previously, in March of last year, the Tokyo Stock Exchange issued a notice on meeting the requirements for focusing on capital costs and stock price operations, requiring further institutional advancement of expectations for improving the valuation of the Japanese stock market.
In terms of valuation, the "requirement" emphasizes that for listed companies with a price to book ratio below 1 times, they should provide explanations and improvements. The specific methods include: firstly, stock repurchase, encouraging market value management through stock repurchase to improve price to book ratio and ROE; Secondly, timely adjustment of corporate strategy; Thirdly, pay attention to the return on capital; The fourth is to actively create and institutionalize channels for information disclosure.
T Daniel Hurley, an expert in emerging markets and Japanese stock portfolios at Rowe Price, said that the corporate governance measures of the Tokyo Stock Exchange have caused a great response. That's why foreign investors, radical investors, hedge funds, and Buffett's Berkshire Hathaway are now closely monitoring the Japanese market.
Shoji Hirakawa, Chief Global Strategist at Tokai Tokyo Research Institute, pointed out that "the announcement from the Tokyo Stock Exchange may trigger another wave of value stock buying."
According to a group of industry statistics, the total market value (in US dollars) of stocks listed on the Tokyo Stock Exchange surpassed that of the Shanghai Stock Exchange last Thursday, marking the Tokyo Stock Exchange's return to the top spot in Asia after about three and a half years.
The yield of 2-year Japanese bonds has turned negative again
In addition to further gains in the Japanese stock market, the Japanese bond market also rose strongly on Monday of this week. As expectations for the Bank of Japan to end its ultra loose monetary policy as soon as possible weaken, the two-year Japanese bond yield has fallen below zero for the first time since July last year!
Market data shows that the yield of 10-year Japanese treasury bond fell by 3 basis points in intraday trading, to the lowest point of 0.555% since December 20. The two-year Japanese bond yield declined by 0.5 basis points to negative 0.005%.
At present, after a 7.6 magnitude earthquake occurred in the Neden area of Ishikawa Prefecture, Japan on New Year's Day, and the dovish remarks made by Bank of Japan Governor Kazuo Ueda last month, market expectations for the Bank of Japan to withdraw from negative interest rate policies in January have significantly cooled.
Resona Holdings analyst Takeshi Ishida said, "If the Bank of Japan does not raise interest rates until April, I believe the market will assume that the central bank has no intention of raising rates. Currently, the reasons for the Bank of Japan not to withdraw from ultra loose monetary policy are increasing."
According to sources familiar with the Bank of Japan's thoughts, it is expected that the bank will largely maintain its earlier forecast at its January meeting next week that the inflation trend will remain near the 2% target in the coming years.
The decline in the yield of US treasury bond bonds last Friday also depressed the yield of Japanese bonds, as investors increased their bets on the interest rate cut by the Federal Reserve in March this year.
Michio Saito, known as the "Mr. Japanese Bond," said on Monday that the Japanese bond market will largely accept any normalization measures from the central bank this year. Saito Daofu was well-known in the market in his early years for playing a crucial role in Japan's debt issuance management reform.
Saito Daofu pointed out that even if the Bank of Japan modifies its yield curve control plan or raises short-term policy rates, Japan's long-term yield will not significantly exceed 1%.
He added that after the end of negative interest rates in Japan, it is not expected that there will be a series of significant interest rate hikes like in the United States and Europe, which will limit the upward trend of 10-year Japanese bond yields. A single decision by the Bank of Japan is unlikely to have a significant impact on the market. Even with tightening measures, the overall environment may still remain significantly relaxed.