BofA Sees Near-Record Crowd at Tokyo Forum Despite Topix Losses

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  • Brokerage expects second-highest turnout ever from overseas
  • This comes as Japan equities head for worst year since 2011

Bank of America Merrill Lynch is preparing to welcome a near-record crowd of global investors to its annual equity conference in Tokyo even as stocks head for their worst year since 2011.

Registrations for the forum, which runs for the whole of next week, suggest the second-highest turnout from overseas in its 13-year history, said Sakura Nishimoto, deputy director of Japan research at the brokerage in Tokyo. The event -- one of the biggest in the Japanese calendar -- is attended by about 200 companies including Sony Corp. and SoftBank Group Corp. and comes just before the Bank of Japan concludes a policy review and decides whether to add more stimulus.

At first glance the level of interest this year may seem surprising, until you factor in exchange rates. While the benchmark Topix index has slumped in 2016 when measured in yen, it’s posting gains in other currencies. In fact, the dollar-based Topix is trading near its highest level in more than a year. Even in yen, the equity measure is up 13 percent from its year-low in February.

“We step in and buy when things are getting less bad, and that is what we have seen in Japan,” said Nader Naeimi, the Sydney-based head of a dynamic investment fund for AMP Capital Investors Ltd. who started buying the nation’s equities again in July. He says the BOJ’s near doubling of exchange-traded fund purchases and the possibility of tweaks to its bond-buying program mean stocks such as banks could go “substantially higher.”

Currency Influence

The Topix has lost 13 percent in 2016 in the local currency, but it’s up 3.2 percent in dollars and 0.1 percent in euros. The yen has surged 18 percent against the greenback this year, which provides a boost for overseas investors who haven’t hedged their currency exposure.

While Merrill is expecting a high turnout for its event, stock-purchasing data show wariness remains about the nation’s equities. Foreigners have swung between buying and selling of Tokyo shares in recent weeks, according to Japan’s bourse. Investors in the two biggest U.S.-listed ETFs tracking Tokyo stocks have pulled more than $11 billion in 2016. Although one is hedged and the other isn’t, both have seen roughly similar amounts of outflows.

Hideo Hayakawa, a former BOJ executive director who has argued that the central bank should scale back bond purchases, and Katsunobu Kato, a member of Prime Minister Shinzo Abe’s cabinet, will give keynote addresses at the conference on Sept. 14.

“There is still interest in Abenomics and the BOJ,” especially ahead of the central bank’s meeting this month, said Merrill’s Nishimoto. “We are seeing more and more investors coming out of Asia, and I think that is because a lot of offices are now headquartered in the area for their Asian equity investments.”

Rakuten Inc., the e-commerce firm that was picked for inclusion in the Nikkei 225 Stock Average this week, is the most sought-after company for one-on-one meetings with investors at the event, followed by Yahoo Japan Corp., according to the brokerage.