Nomura's Individual Investor Survey for December

The results of Nomura’s Individual Investor Survey [pdf] for December (released earlier this month) show sentiment (based on a three-month share price outlook) nose dived to its lowest level since the survey began in April 2006. The fallout from the U.S. subprime mortgage mess is a top concern and outweighs consistent views that Japanese equities appear undervalued.

Nomura closed its survey on Nov. 22, at which time the Nikkei 225 fell to a year-to-date intra-day low of 14,669 and prior day ytd closing low of 14,837. Similar to previous surveys where individual investor sentiment deteriorated (although not to this extent), the gloomy outlook proved to be a contrarian indicator, as the N225 went on to recover 16,000 about two weeks later (for a gain of about 8%).

Note, the November survey showed a slight improvement in sentiment, however, the N225 fell by more than 9% during the period until the cutoff for the Dec. survey.

Individual investors are overwhelmingly bearish based on a survey question about macro factors impacting the stock market. The only bullish factors are the domestic economy and corporate earnings. Trade data ex-USA reflect robust activity with Asia and Europe.

The N225 lost 1.7% to 15,249.79 on Monday 12/17.

Nikkei 225 Stock Average chart as of Friday's (12/14) close:

Extracts from December's survey:

Most Appealing Sectors:

1. Pharmaceutical & Health care (second "most" last month)

2. Information & Telecommunications (third "most" last month)

3. Resources (first "most" last month)

Least Appealing Sectors:

1. Financials (second "least" last month)

2. Construction & Real Estate (first "least" last month)

3. Transportation & Warehousing (not among "most/least-3" last month)

In its monthly feature question, Nomura asked investors about 2008 investment themes and the likely market impact on those subjects. The responses were mostly bearish with top themes expected to have a negative market impact including "prices for crude oil and other natural resources," "the U.S. subprime loan problem," and "foreign exchange." Responses with positive themes were limited, but included, "shareholder rewards," "mass retirement by baby boomers," and "corporate M&A."

Most-watched Stocks (top-10):

1. Toyota (TM)(JP: 7203)
2. Nintendo (NTDOY.PK) (JP: 7974)
3. Softbank (SFTBF.PK) (JP: 9984)
4. Tokyo Electric Power (JP: 9501)
5. Takeda Pharma (JP: 4502)
6. Nippon Steel (JP: 5401)
7. Toshiba (TOSBF.PK) (JP: 6502)
8. Oriental Land (JP: 4661)
9. Mitsubishi Corp. (JP: 8058)
10. Kagome (JP: 2811)

*ADR honorable mentions:
• Sony (SNE) (JP: 6758)
• Mitsubishi UFJ Fin. Grp. (MTU) (JP: 8306)
• Canon (CAJ) (JP: 7751)
• Honda (HMC) (JP: 7267)
• Hitachi (HIT) (JP: 6501)
• Nissan (NSANY) (JP: 7201)
• Mizuho Fin. Grp. (MFG) (JP: 8411)
• Takefuji (TAKAF.PK) (JP: 8564)
• Nomura (NMR) (JP: 8604)

Disclosure: The author does not own shares of any companies mentioned in this article.