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Nikkei's overperformance during recent market meltdown signals more upside

In November fears of another Greece like scenario were the primary cause of market correction. Interestingly DAX30 hardly moved falling just 2,8% (just shows that fundamentals do matter) and curiously the Japanese Nikkei had just a brief stall in the recent upward trend. On the opposite spectrum FTSE's correction was much more dynamic and the index was making new lows while other indices were stabilizing / rising. This is quite easy to explain from a general macroeconomic perspective.
Both the German and Japanese economies are heavily export oriented and rely on superior industries, while the British economy is much more dependent on the financial sector that is more sensitive to any kind of shocks in the system.
Markets move in tandem of course, so when S&P500 is "bullied" most market rise accordingly, however it is during corrections that true market strength is revealed, as buyers are more (or less) willing to "protect" the market by buying the dips. It is fundamental conviction that allows buyers to step up aggressively when general sentiment is weak. The fact that Nikkei was making new highs while FTSE and CAC40 were making new lows is a strong signal that Nikkei is cheap and has more upside than many expect. Similarly DAX was a strong performer.
There are many problems in the Japanese economy and they are common knowledge: aging population, falling prices, strong currency, rising costs of imported commodities, large government debt burden to name a few. Nikkei's performance in the last 20 years is a reflection of these problems. At these levels however, Japanese stocks can be treated as one big long term option on the region. Asian share in global GDP is expected to rise considerably in the next 20 years with China leading the pack. Barring a serious military conflict or government default Japanese stocks should benefit from this long term trend. S&P downgrade of Japan's sovereign rating paradoxically couldn't come at a better time, as strong yen is damaging the exporters. Interestingly the last time S&P downgraded the rating was in 2002 and 5 years later Nikkei was 100% higher. Shorting the yen and buying stocks could be a very profitable strategy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.