Japanese stocks to rebound after recent sell-off – SuMi TRUST

Sumitomo Mitsui Trust Asset Management (SuMi TRUST) on Japanese equities – looking for a bounce back after the sharp sell-off:

• Japanese equity market dropped sharply in early August on weak US data and yen strength
• SuMi TRUST strategist Hiroyuki Ueno sees this as temporary correction
• Yen appreciation driven by diverging Fed/BOJ policy expectations
• Ueno: Market should return to uptrend as Japanese corporate earnings remain robust
• Double-digit earnings growth expected for FY2024-25
• Solid demand seen from domestic and foreign investors waiting to enter market
• Overall outlook positive as Japan exits deflation cycle and economy normalizes

Key quotes:

• “In the short-term, the market may continue to be swayed by foreign exchange rates and the monetary policy of both Japan and the US. However, in the mid to long-term the market should calm and return to its former upward trend because Japanese corporate earnings remain robust and Japan’s economy as a whole has been able to escape its deflationary cycle and continues to normalise”
• “Overall, corporate earnings in Japan are robust, and the Japanese economy is exiting its deflationary cycle; these factors will support the market’s return to an upward trend”

The bottom line: Recent volatility presents buying opportunity in Japanese stocks as fundamentals remain strong.

This article was written by Eamonn Sheridan at www.forexlive.com.