At the time of this survey the N225 had gained over 1,150 points (+7.4%) from the prior survey, so it's assumed investors accepted that their could be some profit taking, but do not expect a correction by any means. Also, what's important to keep in mind is responses for trading activity (number of different stocks traded, frequency of trading, and number of stocks held) improved across the board with investors saying they are more active in the market now and intend to become more so over the next three months.
Extracts from Nomura’s Individual Investor Survey
Area of investment focus: Stock price movements and technical factors (14.2%, +0.8% month-over-month), Strong earnings growth (14.8%, +3.3%), Stable earnings growth (49.6%, same), Dividends and shareholder returns (21.4%, -4.1%)
(1) The outlook on the stock market declined over recent surveys -- see explanation above. 80.4% of the respondents (versus 84.3% last month) 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, 50.6% (vs. 48.9%) responded for +1,000, 22.5% (vs. 26.4%) for +2,000, 5.6% (vs. 6.5%) for +3,000 and 1.7% (vs. 2.5%) for >+3,000.
(2) Among market impact factors, respondents had a more positive outlook for all factors compared to last month. Most notably, "overseas securities markets" and "market factors & psychological factors" received the largest number of responses, improving to a majority "somewhat positive," from "neutral" in November. Japanese investors seem to be well aware of the strength of equities in New York and Hong Kong, among other exchanges/indices, where multi-year and all-time highs have recently been set.
(3) For the second consecutive month, Information & telecommunications was the most appealing sector; Consumer-related jumped to the 2nd spot after not making the top-3 last month; Resources remained in the 3rd spot; Pharmaceuticals & Healthcare which was 2nd last month fell out of the top-3.
Least appealing: In-line with recent surveys, Resources was again chosen as the least appealing sector despite it also being among the most appealing; Financials stayed in the 2nd spot; Construction & Real Estate stayed in the 3rd spot.
(4) In the survey's feature question, investors were asked their opinion on the market impact of various investment themes in 2007. In short, respondents viewed "the domestic economy," "the Abe administration," "an end to deflation," "land prices," and "shareholder rewards (dividends, shareholder special benefits, etc)" as the most positive factors. The top-5 negative factors given among a list of selections were: "the overseas political situation and geopolitical risk (referring to the M. East and N. Korea, etc)," "prices for crude oil and other natural resources," "corporate scandals and accounting problems," "BoJ's monetary policies," and "Societal disparities."
Top-5 Most Watched Stocks: (survey respondents were only allowed to choose 1 stock; Japanese tickers are 4-digit codes)
• Toyota (ADR: (TM), 7203) *also #1 last month
• Softbank (OTC: (OTCPK:SFTBF), 9984) *also #2 last month
• Sony (ADR: (SNE), 6758) *also #3 last month
• Aeon (ADR: AONNY.PK), 8267)
• Japan Airlines (ADR: (OTC:JALSY), 9205)
• Tokyo Electric Power (9501) *#6 this month, #4 last month
• Mixi (2121) *#5 last month, not ranked this month; recent IPO, Japan's leading SNS
iShares MSCI Japan Index ETF (EWJ) 1-year chart:
Disclosure: I have a long position in Nomura Holdings, the parent company of the publisher of this survey. I do not own shares of any other companies/ETFs mentioned in this article.