Individual Investors Rising Through Wreckage of Japanese Equities

by: Steven Towns

To say that the Japanese are sitting on a lot of cash is an understatement. In fact, with as much as $15T of aggregate “AUM,” they continue to struggle (esp. since the YCT was grounded) to find a way to earn better than next-to-nothing returns, given the nation’s miniaturized monetary policy. Individual investors’ long disregard for domestic equities (they’re not solely to blame) has been a big hindrance in bringing the benchmark Nikkei 225 back to a respectable level (20k remains elusive, but first things first, back to 10k). Don’t despair, however, because the Yamadas and Watanabes are back in action, rising through the wreckage — after the N225 nosedived in October to a 26-year low.

Martin Fackler of The New York Times recently explained how retail investors swarmed in to buy battered stocks, and even newbies were called to action to open brokerage accounts and “buy low.” The problem is that simultaneously, the barbarians were selling just as fast. Nevertheless, retail buying combined with the resurrection of pension funds (talk about disregard for domestic equities, rather it’s more along the lines of dereliction — just how long could equity dividend yields of 2.5%-plus be ignored with the 10-year JGB a whole point lower), has helped cleanup the wreckage in Kabutocho. I’m not sure buying stock is exactly patriotic, but there’s some safety shared among individuals buying, as long as they’re convinced others are buying, too. The solidarity will unfortunately come to an end, sooner rather than later, if the black ships don’t return. In the meantime, below is a glimpse at what’s on the national radar (the usual suspects) per a Nomura survey.

Toyota (7203) (TM: 69.66 +1.66%)
Tokyo Electric Power (9501)
Sony (6758) (SNE: 23.56 +1.16%)
Takeda Pharma (4502)
Mitsubishi UFJ FG (8306) (MTU: 6.46 0.00%)
Nintendo (7974)
Mizuho FG (8411) (MFG: 5.65 -2.25%)
Nippon Steel (5401)
Panasonic (6752) (PC: 15.79 +0.38%)
Sharp (6753)
Softbank (9984)
Oriental Land (4661)
Honda (7267) (HMC: 23.42 +0.73%)
NTT DoCoMo (9437) (DCM: 16.42 -0.91%)

Disclosure: No position in any stocks mentioned.