Nomura's Individual Investor Survey for August: Caution Prevails

The securities arm of Nomura Holdings (NMR) has released its August survey of individual Japanese investors (for direct access to .pdf click here). This month's survey shows that individual investors remain mostly optimistic with 80.7% out of 1,000 respondents expecting the Nikkei 225 to rise over the next three months. Overall, Nomura seems to think the results show Japanese investors remain rather cautious and are seeking value plays with medium- to long-term holding periods.

Extracts from Nomura’s Individual Investor Survey

Area of investment focus: Stock price movements and technical factors (13.7%), High earnings and growth (13.9%), Stable earnings and growth (46.4%), Dividends and shareholder returns (26.0%)

Overview:

    (1) Outlook on the stock market is mostly positive but surveyed trading activity decreased again on a monthly basis with investors seeming to take more a cautious approach — 80.7% of the respondents said they expect the Nikkei Average to rise during the next three months. Nomura gauges responses in 1,000 point N225 increments and of those expecting a rise, 37.8% responded for +1,000, 33.3% for +2,000, 6.9% for +3,000 and 2.7% for >+3,000.

    (2) Among market impact factors, geopolitical risk appears to be a main concern for investors

    (3) Information & telecommunications was the top choice as the most appealing sector; 2nd was resources; and 3rd was pharmaceuticals & healthcare replacing 'consumer related' from last month

Least appealing: Resources, construction & real estate, and financials

    (4) In the survey's feature question respondents gave mixed results on their views of JASDAQ and other startup markets. 32.6% of respondents said such markets are "attractive." 14.1% said they are "not attractive" due to volatility and potential fraud. 40.2% answered "neither attractive nor unattractive."

Top-5 Most Watched Stocks: (survey respondents were only allowed to choose 1 stock; Japanese tickers are 4-digit codes)

    • Toyota (ADR: (TM), 7203)
    • Softbank (OTC: (SFTBF), 9984)
    • Tokyo Electric Power (9501)
    • Nippon Steel (5401)
    • Sony (ADR: (SNE), 6758)

Comments

[Enzio von ...:]

Steven, another reason the Japanese investor is turning cautious has to do with the increasingly awful policy mix: base money contracted by 18% yoy in July, and next year the MoF has to increase VAT: on 7th July, the government decided that by 2011, it wanted to eliminate its primary deficit.

Sounds like there is gloom ahead; I am looking for a similar bout of market violence as we had in May - when investors finallly moved out of denial and accepted that Fed Funds have to keep climbing. This time, the "moving out of denial" will be that investors see that Japan's growth outlook is NOT rosy at all, courtous of the dark clouds of the policy mix just discussed.

2006 Aug 05 06:45 AM

[Asif Suria:]

The following sentence makes no sense,

<i>"...individua... investors remain mostly optimistic with 80.7% out of 1,000 respondents expecting the Nikkei 225 to rise over the next three months. Overall, Nomura seems to think the results show Japanese investors remain rather cautious... "</i>

until you get to this breakdown,

<i>"Nomura gauges responses in 1,000 point N225 increments and of those expecting a rise, 37.8% responded for +1,000, 33.3% for +2,000, 6.9% for +3,000 and 2.7% for &gt;+3,000."</i...

I wonder if all this caution is a contrarian buy indicator. However like Enzio suggests, there may be gloom ahead and I am content watching from the sidelines as far as the Japanese market is concerned.

2006 Aug 06 03:00 PM

[Steven Towns:]

Asif -- Thanks for leaving a comment. I don't blame you for watching from the sidelines. Ultimately, it depends on one's specific situation and if one is trading or investing. The volatility makes for good trading circumstances. At the same time it is a possibility to accumulate via buying on dips if one is bullish longer-term and has patience. I strongly doubt the "gloom" case for Japan but certainly respect Enzio's position and valued arguments.

2006 Aug 07 11:26 AM