European investors have returned to the Japanese stock market. Net purchases by European funds have risen to the highest in 1 1/2 years, tracking the Nikkei’s ascent to 15-year peaks as Japan Inc pledged to bump up shareholder returns.
European investors turned buyers of Japanese stocks in March, with their net purchases reaching 211.3 billion yen ($1.7 billion). In April, their net buying more than tripled to 758.5 billion yen, the highest since December 2013, data from the Tokyo Stock Exchange shows, Reuters reported.
The inflow of European funds has both Japanese and non-Japanese roots. In March, the European Central Bank implemented its ambitious stimulus program, boosting sentiment and increasing risk-taking among European investors who had been underweight on Japanese equities due to the country’s fiscal deficits and other economic problems.
The other draw was the Nikkei 225 Stock Average’s nearly 17 percent rise so far this year, surpassing the pan-European FTSEurofirst 300 index’s 14 percent gain and the DAX’s 16 percent increase in Germany. The Nikkei has more than doubled since Prime Minister Shinzo Abe implemented his stimulus policies when he was elected in December 2012.
Abe’s calls on companies to target higher returns on equity and attract more investors have also started to bear fruit: share buybacks by companies have accelerated in recent months.
According to Nomura Securities, a total of 168 companies announced share buyback plans in April and May totaling 1.468 trillion yen.
In the fiscal year, which started in April, Nomura expects the total amount of share buybacks to reach 3.8 trillion yen, the highest since the year ended March 2008.
“In the past two months, an increasing number of European investors have been visiting Japan. There is a clear relationship between the number of visits and a money flow into the Japanese market,” said Hisae Toews, investment director at Fidelity Worldwide Investment in Japan.
“European investors do not want to miss the second wave of Abenomics. Many of them are still underweight of Japan compared to other global indexes, so there is more room to raise weighting on Japan.”
