Japan's Fortunes
sopskysalat said...
hello, although nikkei has underperformed the market as a whole against the asia equity, going forward, there is much interest rate risk. you are still confident of the nikkei 225 going to hit new high?
Other Asian bourses have rallied ahead of the Nikkei and Topix. The uncertainty has more to do with the US dollar-yen relationship, the oil price uncertainty, the domestic economy's uncertainty, and the direction of interest rates by Bank of Japan. Its also not so much that Japan is a hard sell but rather the other Asian bourses are an easier sell.
Corporate earnings - Capex increased 11.9% in 3Q2006 which is still decent. Meanwhile, profit growth remained strong at 15.5%, for the 17th-straight quarter of gains. Its the 17th straight quarter, let that sink in first. Mind you, the last 4 quarters had been clouded with much higher oil prices. Since oil prices have started to dip appreciably since August, corporate profits' growth should continue for the next few quarters at least. What is even more important is that margins will be enhanced with weaker oil prices.
Domestic Economy - Wages were unchanged in October and have been disappointing, increasing less than US$100 this year. However, this next phase of rally for the Nikkei will not be led by domestic economy, so its not a big issue.
US Dollar/Yen - The uncertainty overhanging both currencies are now largely removed with US dollar's recent correction. The yen, while at a stronger level, is now much more acceptable as there is a large uncertainty removed.
Interest Rates - This is the biggest stumbling block for investors, that BOJ will be raising rates, of course they will raise rates, when you at at zero and 0.5%, where else can you go?? In fact, the rise is a strong indication of the underlying strength of the economy and the currency. Both important factors.
The number of huge private equity firms setting up shop in Asia and Japan is a big leading indicator to more market action. All said, we should be looking at 19,000 sometime in 2007. All hail the new leader.
sopskysalat said...
hello, although nikkei has underperformed the market as a whole against the asia equity, going forward, there is much interest rate risk. you are still confident of the nikkei 225 going to hit new high?
Other Asian bourses have rallied ahead of the Nikkei and Topix. The uncertainty has more to do with the US dollar-yen relationship, the oil price uncertainty, the domestic economy's uncertainty, and the direction of interest rates by Bank of Japan. Its also not so much that Japan is a hard sell but rather the other Asian bourses are an easier sell.
Corporate earnings - Capex increased 11.9% in 3Q2006 which is still decent. Meanwhile, profit growth remained strong at 15.5%, for the 17th-straight quarter of gains. Its the 17th straight quarter, let that sink in first. Mind you, the last 4 quarters had been clouded with much higher oil prices. Since oil prices have started to dip appreciably since August, corporate profits' growth should continue for the next few quarters at least. What is even more important is that margins will be enhanced with weaker oil prices.
Domestic Economy - Wages were unchanged in October and have been disappointing, increasing less than US$100 this year. However, this next phase of rally for the Nikkei will not be led by domestic economy, so its not a big issue.
US Dollar/Yen - The uncertainty overhanging both currencies are now largely removed with US dollar's recent correction. The yen, while at a stronger level, is now much more acceptable as there is a large uncertainty removed.
Interest Rates - This is the biggest stumbling block for investors, that BOJ will be raising rates, of course they will raise rates, when you at at zero and 0.5%, where else can you go?? In fact, the rise is a strong indication of the underlying strength of the economy and the currency. Both important factors.
The number of huge private equity firms setting up shop in Asia and Japan is a big leading indicator to more market action. All said, we should be looking at 19,000 sometime in 2007. All hail the new leader.
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