A tailwind behind Japanese stocks is strengthening as large foreign funds who have been avoiding the market for decades start to reach into pockets deep enough to take the Nikkei back to its 1989 peak.
surged 27% in the first half of the year, as managers kept habitual below-benchmark weightings on Japan - settings that didn't budge for years while the share index disappointed.
"We are looking for more evidence of corporate reform to support the enthusiasm for its equity markets that has gripped foreign investors so far this year," wrote analysts at BlackRock Investment Institute, in its mid-year outlook report last week. "It's not the case that we've already seen the completion of offshore investors' quite aggressive investment in Japan equity markets," said Nomura's chief equity strategist for Japan, Yunosuke Ikeda."I don't think the Nikkei will come back to the old range between 25,000-30,000," said a Japanese pension fund manager who requested anonymity as he is not authorised to speak to media.Archie Ciganer, a portfolio manager at T.
"Now, a lot of asset owners have decided just not to invest in China any more, and that's made Japan the top dog in Asia."Although billionaire investor Warren Buffett has grabbed headlines with his Japan stock purchases, a lot of inflows have been from so-called fast money overseas, such as algorithmic traders or hedge funds investing with borrowed money.
Many analysts and investors, though, consider the declines a healthy and necessary retracement before the next leg higher, with 35,000 often touted as a target for this year as slower-moving foreign investors start to buy in size.
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