Nomura Sees Trump Extending Japan’s Stock Rally Next Year

  • Nikkei 225 may exceed firm’s in-house forecast, Akedo Says
  • Foreign investors saw sentiment shift ahead of Japanese

Japanese Equities: Further Upside to Go?

Policy pledges by U.S. President-elect Donald Trump are bullish for Japanese share prices, which will build on their recent gains in 2017, according to Norikazu Akedo, a senior managing director at Nomura Holdings Inc.’s brokerage unit.

Trump’s election win was a “great turning point” for Japan equities, due to his commitments to invest in infrastructure and cut taxes, said Akedo, 50, who is also joint head of global markets Japan at Nomura, the country’s largest brokerage firm.

Nomura has predicted that the Nikkei 225 Stock Average will rise to between 20,500 to 21,000 points by the end of next year, as much as 14 percent above Friday’s close of 18,381.22, according to a forecast issued Nov. 18. The probability is “not so little” that the index will exceed the view “to a large extent,” Akedo said in an interview, while declining to give a precise prediction.

Japanese investors, however, have lagged behind their international peers in interpreting the Trump win as bullish for the local market. “Foreign investors have been fairly aggressive to purchase Japan stocks since the U.S. presidential vote, while the temperature of local investors is rather mild,” said Akedo.

Purchases of Japanese equities by foreign investors at exchanges in Tokyo and Nagoya exceeded sales by 891 billion yen ($8 billion) between Nov. 7 and 18, while Japanese insurers, banks and asset managers’ sales surpassed purchases by 304 billion yen, according to Japan Exchange Group Inc.

Currencies supportive

Currency market moves are also supportive for Japanese equities. “We could expect the trend of a weakening yen a bit longer,” Akedo said. “As a result, Japanese companies can improve their earnings, which will give a positive impact on their share prices.”

The yen has weakened about 6 percent against the dollar since Trump’s victory. The currency rebounded Monday, climbing 1.2 percent to 111.86 per dollar at 12:38 p.m. in Tokyo. The Nikkei 225 slid 0.6 percent from a 10-month high to 18,273.44.

This week, Nomura is due to host its annual investor conference where executives of 276 companies, including Nippon Telegraph & Telephone Corp. Chief Executive Officer Hiroo Unoura, will discuss their business strategies. Some 1,800 investors have registered to attend, the fewest in four years. The total, which includes 1,200 Japanese and 600 from overseas, compares with 2,100 investors last year.

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