Japan stocks recoup most of August losses, JPM remains overweight

JPMorgan analysts said they remained overweight on Japanese stocks after a recent rebound saw them recoup a bulk of losses made in August, with fund flow data also showing some foreign buying. 

Japan’s Nikkei 225 and TOPIX indexes were trading close to their strongest levels since August 1, after plummeting to 10-month lows and entering a bear market during the month.

Both indexes were now trading more than 20% above their August lows, and were also back in sight of record highs hit earlier this year. 

JPM said that while it had trimmed its year-end price targets for both indexes by about 6% each, it still remained Overweight on Japanese stocks.

Trading data in the week to August 5-9 showed short-term overseas investors sold Japanese positions, while retail investors and medium-to-long-term foreign traders were buyers, especially with bargain buying into heavily sold-down sectors. 

JPM said Japanese firms clocked strong earnings in the June quarter, with depreciation in the yen contributing heavily to this trend. 

But the yen firmed sharply in August as the carry trade unwound. Further strength in the yen- as the Bank of Japan raises interest rates- could potentially weight further on company earnings.

Source: Investing.com