The Nikkei had a rough go last week indeed, losing 3.6% and the 14,000-level (13,973.73); TOPIX fell to 1,371.57 after a short-lived recovery of 1,400 two weeks ago. No worries though, as Chicago Nikkei 225 futures not only held 14k, but added 140 points to the upside (14,220) setting the stage for a gap up on Monday (Osaka N225 futures: 13,980). The Bank of Japan held its benchmark rate at 0.5%, as expected; meanwhile, the yen has eased to its weakest level against the dollar, ¥108/$1, since late February.
Inflation and U.S. i-bank earnings will weigh heavy on sentiment this week. Lehman (LEH) leads off on Monday, 6/16, Goldman (GS) is up on Tuesday, 6/17 and Morgan (MS) reports on Wednesday, 6/18. Circuit City (CC) is scheduled to announce earnings on Thursday, 6/19, which could impact consumer electronics stocks.
Back to Japan, the 25 DMA of Topix-1 advancers/decliners slipped to 97.2%, from its recent string of 110-120-level readings. Decliners outpaced advancers over 2:1 on Friday and 54 stocks hit new lows vs. 14 hitting new highs. The emerging MOTHERS and HERCULES markets are displaying particularly bearish readings in the 70-75%-range, perhaps having something to do with those i-banks bailing on them.
As of Friday’s close the N225 is trading at 16.3x trailing and 16.6x forward earnings, 1.64x book, 1.49% trailing yield and 1.57% forward yield. By comparison, TOPIX (1st Section) is trading at 17.5x trailing and 16.8x forward earnings, 1.51x book and 1.69% trailing yield and 1.74% forward yield.
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This article has 2 comments:
We've also got 63.3 percent of the issues in the TSE 1st section trading above their 10-week MAs. That number reached a rather eye-catching 84.4 percent in mid May, and it's been stubbornly high since then, even with the recent pullback. Either the market is embarking on a serious trend higher, which I would tend to doubt, or that number needs to come down below 50 percent, perhaps to 40 or just below, where I would expect safer buying.
I continue to like Sumitomo Trust, and full disclosure: I have a position. At below 850 (closed up 29 at 852 today), it yields more than 2 percent, and the dividend is solid. Actually, some of the banks here are still trading at undeserved discounts, IMHO. Indeed, Wall Street will either erase some of those discounts or pad them this week. But I continue to buy on bouts of weakness. The systemic risk seems to be over there (stateside), not over here.
Agreed re. the stubborn heights of some of the readings we've seen. Surely they'll ease, although it is comforting to see the resiliency in Japan now, compared to the past when it was almost knee-jerk with the N225 seeming to mirror the direction of the S&P 500. That said, still a ways to go to get back to last year's levels, but it's upside nonetheless. Widespread buying on bouts of weakness not a bad thing at all.