The Topix index is set for its highest level in more than two years, but foreign investors aren’t sticking around to see if it keeps climbing.
Non-resident investors were net sellers of Japanese stocks for a seventh-straight week through September 8. They sold 645 billion yen ($5.8 billion) last week, the most in six months, according to Ministry of Finance data.
Foreign pension funds have been switching from stocks to bonds this year, wrote Mitsubishi UFJ Morgan Stanley strategists led by Chisato Haganuma in a note dated Sept. 13. This selling has been exacerbated by the global shift to passive from active strategies and “the fact that Japanese stocks are no longer as prominent in the global market.”
Japanese stocks should rise through year-end on improving earnings and foreigners may return in the next six months, but be wary of international politics and the currency market in the near term, the analysts wrote.