26 Mar 2015
Hedged-based foreign flows into Japanese equity market – Nomura
FXStreet (Barcelona) - Yujiro Goto, FX Strategist at Nomura, notes that FX hedged-based investment into Japanese equities is strong, with ETF products having been attracting new funds flows for 13 consecutive weeks now.
Key Quotes
“After slowing at the beginning of the year, foreign investment in Japanese equities has been recovering. Foreign investors were net buyers of Japanese equities for the fifth-consecutive week, according to MOF data released last Thursday. They bought JPY1.3trn ($10.7bn) of Japanese equities during the five weeks.”
“FX hedged-based investment by foreign equity investors is still likely to be strong though. One of the major ETF products investing in Japanese equities with FX hedges has been attracting new fund flows for 13 consecutive weeks now.”
“During the second week of March, net flows into hedged Japanese equity ETFs recorded the biggest amount since early November after the BOJ and the GPIF surprised the market positively. Even though ETF flows only partly capture foreign investment in Japanese equities, the hedge ratio for investment remains relatively high, decreasing the FX impact of the recent recovery in foreign flows into the Japanese equity market.”
“Foreign investment by Japanese investors also remains strong, and the recovery in foreign equity flows into the Japanese equity market is unlikely to change the trend of JPY, while it may place some downside pressure.”
“We still judge flow data as positive for USD/JPY, and the gradual rise in USD/JPY is the most likely scenario this year.”
Key Quotes
“After slowing at the beginning of the year, foreign investment in Japanese equities has been recovering. Foreign investors were net buyers of Japanese equities for the fifth-consecutive week, according to MOF data released last Thursday. They bought JPY1.3trn ($10.7bn) of Japanese equities during the five weeks.”
“FX hedged-based investment by foreign equity investors is still likely to be strong though. One of the major ETF products investing in Japanese equities with FX hedges has been attracting new fund flows for 13 consecutive weeks now.”
“During the second week of March, net flows into hedged Japanese equity ETFs recorded the biggest amount since early November after the BOJ and the GPIF surprised the market positively. Even though ETF flows only partly capture foreign investment in Japanese equities, the hedge ratio for investment remains relatively high, decreasing the FX impact of the recent recovery in foreign flows into the Japanese equity market.”
“Foreign investment by Japanese investors also remains strong, and the recovery in foreign equity flows into the Japanese equity market is unlikely to change the trend of JPY, while it may place some downside pressure.”
“We still judge flow data as positive for USD/JPY, and the gradual rise in USD/JPY is the most likely scenario this year.”