Japanese stocks advanced for a second day, pushing the Topix closer to reaching its highest level since August 1990, with strategists at Goldman Sachs Group Inc. saying solid fundamentals and expectations for structural changes “justify a bullish stance” on the nation’s equities.
(Bloomberg) — Japanese stocks advanced for a second day, pushing the Topix closer to reaching its highest level since August 1990, with strategists at Goldman Sachs Group Inc. saying solid fundamentals and expectations for structural changes “justify a bullish stance” on the nation’s equities.
The economic outlook for Japan is strong given positive factors including an inbound recovery, plans for robust capital expenditure and ongoing monetary easing at the Bank of Japan, Goldman strategists Kazunori Tatebe and Bruce Kirk wrote in a note. In addition, companies are announcing solid earnings, valuations are cheap and long-term investors are positioned in the market.
Japan’s benchmark rose 0.9% to 2,114.85 on Monday, coming within 0.3% of surpassing its previous closing level peak reached in September 2021. The Topix is trading near levels not seen since the nation’s bubble economy burst.
“We note the solid fundamentals compared with stocks on overseas markets, and we also think that expectations for structural changes/reforms could push Japanese equities up even further,” the Goldman strategists wrote.
Warren Buffett’s renewed endorsement of Japanese stocks has provided hope that foreign investment is returning. Overseas traders bought a net $22 billion worth of the nation’s stocks and futures in April, amid record levels of inflows.
Rally in Japan Has Another Catalyst in Earnings: Taking Stock
At the same time, a flurry of buybacks is supporting sentiment after the Tokyo Stock Exchange called on companies that are trading below book value to outline capital improvement plans. Mitsubishi Corp. said on May 9 that it plans to buy back up to $2.2 billion worth of its shares. Last month, information-technology firms Hitachi Ltd. and Fujitsu Ltd. announced sizable repurchases.
Sub-gauges tracking firms ranging from steelmakers to airlines are higher this year as investors pick up shares with low valuations and the possibility of improved governance. Even beer stocks are attracting renewed attention on prospects of price hikes, more favorable taxation and a rebound in tourism.
–With assistance from Hideyuki Sano and Yasutaka Tamura.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.