Japan's Nikkei posts 34-year high, the best week in 22 months
JAPAN’S Nikkei share average scaled a 34-year peak on Friday (Jan 12), recording its best week since March 2022, underpinned by receding bets on an early exit from the Bank of Japan (BOJ) stimulus and sheer momentum as foreign investors returned.
The Nikkei closed Friday’s trading 1.06 per cent higher at 35,422.95, after rising as much as 2.25 per cent to 35,839.65 for the first time since February 1990. The index rallied nearly 7 per cent and marked a multi-decade high every trading day this week.
Technical indicators were flashing warning signs, however, with one such measure – the relative strength index, or RSI – climbing to 74.55 for the Nikkei. Readings above 70 indicate an overheated market.
Nikkei volatility has spiked over the past two days to reach the highest level since Oct 31, when the BOJ unexpectedly tweaked policy to allow bond yields to rise further.
“It wouldn’t be unusual to see a retracement at any moment of the steepest part of this rally,” Nomura Securities strategist Maki Sawada said, adding that she had expected the Nikkei to decline at Friday’s open.
The rally was supported by receding bets for an end to the BOJ’s negative rate policy at its Jan 22-23 meeting, following the New Year’s Day earthquake on the Noto peninsula, northwest of Tokyo.
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Wages data this week has given further incentive for the central bank to hold fire on any hawkish shift.
At the same time, finance ministry data on Friday showed that foreign investors bought a net US$2.04 billion of Japanese equities in the week ended Jan 6, following two weeks as net sellers.
So far this year, the Nikkei has climbed 6.3 per cent, the only major global stock index to post gains other than the US S&P 500, which is up 0.21 per cent. Britain’s FTSE lost nearly 2 per cent and Hong Kong’s Hang Seng tumbled 4.43 per cent.
“Foreign investors think the Japanese market is relatively better than other markets: it is not as extended as the US markets, and the economy is better than Europe or China,” said Shinji Abe, an equity strategist at Daiwa Securities.
“Given the current strong momentum, the Nikkei can reach above 36,000 or even get close to 37,000 in the near term.” REUTERS
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