WSJ [excerpt]: Japanese cosmetics and pop culture have long been hot items in #China—Japanese #stocks, less so.
The fact that this is beginning to change—Chinese individual #investors are piling headlong into Japanese shares as their own market flags—is both a sign of the times and a big hint as to why Japanese stocks are suddenly doing so well in general.
Foreign investors who previously parked a lot of cash in #China need somewhere else for their international allocations. A lot of Chinese domestic capital is eyeing the exits, too: And Japan is cheaper than the U.S. and, potentially, comes with less political and regulatory risk.
Japan’s Nikkei 225 index has gained 9% already this year, just 6% off its record high in 1989. China’s CSI 300 index, on the other hand, has slid 6%. Hong Kong’s Hang Seng Index, which includes tech heavyweights such as Alibaba and Tencent, has done even worse: losing 12% so far in 2024.
Meanwhile, China-listed exchange-traded funds tracking Japanese stocks are doing rather well. ...
While individual investors in China have long been notorious for trend-chasing, the anecdote is indicative of a much larger trend: Investors exiting China seem to be embracing Japan.
In the week ended Jan. 12, foreign investors bought a net 956 billion yen, equivalent to $6.5 billion, of Japanese stocks. On net, they only bought around 3.1 trillion yen worth in all of 2023. On the other hand, foreign investors, including those based in Hong Kong, have in 2024 already sold around a net 30 billion yuan, the equivalent of $4.2 billion, of stock listed in Shanghai and Shenzhen through Stock Connect—a trading link between mainland Chinese and Hong Kong exchanges.
...To be sure, there are fundamental reasons why investors are bullish on Japan, too. The government’s push to improve corporate governance has boosted dividends and buybacks. Activist investors are increasingly throwing around their weight—and Japanese companies are more willing to listen. Warren Buffett’s endorsement, through his big investment in Japanese trading companies, gave sentiment another push. And, such as most stock markets around the world, Japanese bourses are benefiting from the end of the Federal Reserve rate-hiking cycle.
Yet the sluggish performance of Chinese stocks is also a key reason why investors are flocking to Japanese markets. #Money fleeing Chineses stocks needs to find a market that is big enough—especially if managers want to maintain their overall level of exposure outside the U.S. The $6 trillion Japanese stock market is a perfect new home.
#news #business
