Steven Towns

Japanese Investors Saying 'No Thanks' to Government Bonds

@dieuwer: Re-read/think over my last paragraph. The point of this article is about yield, not marketing timing. Also, I'm sure you realize there was also a big tech (IT) rally in Japan, too. And believe it or not, gold has appreciated obviously in yen.

On Nov 05 03:40 PM dieuwer wrote:

> Local deflation should be meaningless to local Japanese investors.
>
> So what there was deflation from 1990 - 2000? Japanese could have
> invested in NASDAQ stock and make a 10-fold gain.
> So what there supposedly is deflation since 2000 again. Japanese
> could have invested in gold and commodity stocks and make a fat gain.

Japanese Investors Saying 'No Thanks' to Government Bonds

Based on demand: "The MoF now only expects to raise Y1.3 trillion (US$14.3B) this year from individual investors, down from a prior estimate of Y2.4 trillion, and considerably lower than the record Y7.2 trillion raised in ‘05." Also, there was an anecdotal report that an unnamed large domestic financial institution canceled its plans to promote the October individual investor JGB issue and instead direct clients into one and two-year emerging economy notes.

On Nov 05 12:33 PM user225084-justme wrote:

> >>The Mainichi Shimbun (original in Japanese) reported early Thursday
> that Japanese Government Bonds’ (JGBs) popularity is rapidly falling
> among individual investors.
>
> How did the report arrive at the conclusion made that the bonds popularity
> is rapidly falling??

Japanese Investors Saying 'No Thanks' to Government Bonds

Donald, while there are of course are other factors, the bottom line is that the yield is so paltry as to dissuade Japanese individual investors who have been earning even less on cash deposits and suffering in a deflationary environment to boot. Also, don't miss the fact that the Japanese savings rate may be down, but the Japanese have a tremendous amount of accumulated savings.

On Nov 05 12:24 PM Donald Ingram wrote:

> Other factors are to be considered besides low returns;
> 1/ An aging work force.
> 2/ A much lower savings rate.
> 3/ High unemployment.
> 4/ Collapsing export market.
> 5/ Diminished tax returns.
> 6/ Crushing social obligations.
> 7/ New, inexperienced government.
>
> To put forward your reasoning as just the poor rate of return, vis
> a vis the low interest rate, is to ignore the above mitigating factors.

A Look at Japanese Stock Valuations

Not sure why you had to choose to pick on Madonna. I'd argue that she's been far more successful than Japanese political leadership since she's remained relevant by way of recreating herself as necessary over the years. As for JP leadership, it's more like they're wearing the same "panties" (think LDP), as it's just more status quo and the overall situation is worsening / becoming more convoluted -- perhaps from not really changing the underlying, or at least not in a meaningful way (ex-Koizumi).


On Jun 05 12:27 AM doubleguns wrote:

> Japan changes prime ministers like Madona changes panties, leaving
> them with no leadership. As soon as they start to move in any direction
> a new captain is placed at the helm and he steers in another direction.
>
>
> Thier stock market will just flail around until some leadership establishes
> a direction for the economy and is allow to stay on course.
>
> The only reason they have not ran aground so far is they have stimulated
> the hell out of the economy to the point that the debt is 100% of
> GDP
>
> It would seem the master (seekingalpha.com/symbo...) is now
> taking lessons from the student (Japan).

Outlook for Japanese Stocks: A Rising Sun

Not quite feeling your optimism, and I still think the broader and deeper negatives far outweigh any incremental positives such as 7 Eleven opening up in Indonesia. And you should really take note that your figures for the DoCoMo - Oakmark deal and the size of Topix-1 are way off the mark: the former was a deal for Y31B or about $310M, not Y31T/$31B! The Topix-1 is definitely not $170B! At Y170T, it's more like $1.7T!

Will the Japan Plan Work?

Carl, you've asked some important questions; too bad you didn't give your opinion or provide some insight. In fact, the recent N225 lows do not exactly mean that a quarter-century of gains have been wiped out. Instead, as you likely know, the gains since the '03 recovery (post-bubble trough) have been wiped out. "Lost decade" --> lost two decades ('89-'09) and counting. Also, the government bought shares in the past, too, and had even been offloading some of its positions with increasing speed until last year. It's a no-brainer that whether its the GoJ or individual or institutional investors that do any buying, it is a survival of the fittest-like climate, setting the stage for a true Darwinian flush. Generally speaking, I see no need (and thus no rush) to get in now and I reiterate what I have been saying recently in that I think stocks, despite the perceived cheapness, are being priced fairly.

Japan's Nikkei: Black Hole or Buying Opportunity?

Let's not forget to recognize the reality in what is not being published, or in many cases is never published (except perhaps in The Economist): Japanese individuals have comparatively little of their wealth allocated to the stock market. This matter is a blessing in a deep bear market, but in recent years it hindered sustaining the recovery from '03 to early '07. That the N225 hasn't fallen with recent economic data is not something to be bullish about. Take for instance the horrendous GDP figure just published. No real reaction ... since, well maybe it was partially factored in; but more importantly, U.S. players sat the session out for the holiday back home, and market participants in Japan were awaiting the reaction of when European markets open. I wouldn't be bullish about the N225 happening to be above its low of last year. What's worrisome is that it and other indices have rather quietly fallen back to those levels. My take is that Japan is largely and rightfully at/around fair value. EWJ is not a good proxy given the counter effect of the yen (unless one has appropriately accounted for it). But without a weaker yen, EWJ will not be in play in any meaningful way. Worst case is the status-quo.

Japanese Equities: Land of the Relatively Rising Sun

Don, good article, and no doubt that EWJ has size and liquidity. Ironically, as I published recently (available on SA by searching ticker EWJ or my website at steventowns.com for those interested), its size and liquidity are exactly what did it in, or more precisely, what did in the Japanese equity market. The massive deleveraging last autumn handily took the N225 to a 26-year low. And relative yen strength has basically been the coup de grace for Japanese equities. I am not too excited about investment funds that are in the red but outperforming relatively. And in this case, any significant recovery for EWJ would necessitate a weaker yen, which would impact the fund's returns. I would be more interested in cherry picking some of EWJ holdings for accumulation and dividend reinvesting.

Goldman Forecasts Japanese Equity Recovery from Mid-2009

The Hammer -- Have a look at this: steventowns.com/2008/0.../

Unfortunately I do not have availability at this moment to address all your questions.

-Steven

Nikkei Weekly Outlook: Eye on I-banks, Inflation and the Yen

Hi Lance,

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.

Nikkei Weekly Outlook: Pre-Earnings Downside Risk?

Thanks for your feedback!

Japanese Stocks: Timely Buybacks, Stock Retiring

Hi Ankit,

No problem at all. Companies can buy back shares, which then become part of Treasury Stock and could be reissued; but when Treasury shares are retired (or canceled), it permanently eliminates those shares. In either case, existing shareholders benefit from having a greater share of any profits, although the company's cash level will be lower. The debate is about whether a share buy back is done when shares are undervalued vs. overvalued and whether shares will be reissued or not. The best case for shareholders is obviously when "undervalued" shares are bought and retired.

Hope that helps.

Is a Nikkei 225 Bottom Near?

GKM, thanks for your comment. I actually think there are quite a few out there who are aware of the seemingly attractive valuations of Japanese stocks and the potential for cap gains with a recovery of even just the 18,000-level (that would be nearly 50%) for the Nikkei 225. The problem is not many are willing to commit the capital and thus any recovery at all will take time. A key point of interest now are those dividend yields. Maybe we'll finally see Japanese investors begin to embrace domestic stocks.

The Impact of Japan's Growing Shareholder Rights Movement

Bill, yields for the TOPIX and N225 have been pegged at right about 1% in recent years. Although dividend payouts are rising, I think the issue is the value of indices have risen too, thus keeping yields down.

The media loves to talk about the role activist investors are playing in Japan. Any change to the status quo is certainly news in Japan. However, I think the impact is most felt on smaller firms, in terms of such items as dividends paid.

Hope this quick response helps. I'm sure Mr. Whitten will have some data sources that shed more light on the situation.

Best,

Steven

iShares Asia Region ETFs Weekly and YTD Returns

Thanks Frank!

The U.S. has been outperforming NE Asia, esp. since the Feb. sell-off -- except recently in the case of S. Korea. Note U.S. outperformance of China (referring to FXI, as surveyed above) is misleading, because the main Chinese benchmarks are up around 70% last count, even with the latest drop. FXI is nowhere near that in '07.

One idea why the U.S. is outperforming Taiwan, Hong Kong and Japan perhaps relates to the correlation and interdependence of the three, limiting capital flows on concerns of a U.S. slowdown.

Other reasons relate to valuation and sentiment, since Hong Kong already had a nice run last year and investors/traders appear quick to lock in profits as they do in Japan.

There's also political risk and more direct spillover from items related to China as these countries are closer in proximity and have the deepest economic ties. For example, following the late Feb. sell-off, Japanese stocks fell more than any other country, even China!

Also and most interesting is the fact that Asian countries keep buying up U.S. assets. Japanese in particular are net buyers of overseas equities, whereas they are frequently net sellers of domestic equities.