🏯 TOPIX FUTURES: JAPANESE BULL SAMURAI IS STILL ALIVELegendary investor Warren Buffett was on a trip to Tokyo, the capital of Japan, two months earlier in mid-April 2023, and the titans of the country's giant energy and commodity conglomerates were there to make their presentations.
As usual, over glasses of Coca-Cola NYSE:KO - one of Buffett's most famous investments, they walked into Warren Buffett's suite at the luxury Four Seasons hotel and individually told the 92-year-old American investor the same thing: Japanese trading houses are cheap and should accelerate their move beyond commodities.
The support of the Oracle of Omaha is an important vote of confidence in the big five Japanese trading houses - Mitsubishi Corporations TSE:8058 , Mitsui TSE:8031 , Sumitomo TSE:8053 , Itochu TSE:8001 and Marubeni TSE:8002
It's also a broad endorsement of Japan, that is considered to have outlived its heyday 30-35 years ago, as well as considered less relevant than Asian counterparts such as China and India.
But there's one big question: Is Buffett betting on phasing out fossil fuels, the trading house products themselves, or a combination of the two? Or something else, like impact of the weak yen!?
Buffett's Berkshire Hathaway NYSE:BRK.B reported in August 2020 that it had acquired about 5% of the shares of five trading houses, that sent their stocks up and raised their total investment value above $6 billion. When the Covid-19 pandemic dampened demand for goods, it pushed down the value of company stocks, four of which traded below book value.
“They were selling, I thought, at a ridiculous price,” - Buffett said to CNBC in March 2023.
Three years after the Covid-19 pandemic (that is now hardly remembered) Warren Buffett's bets on Japan have nearly tripled to over $17 billion.
But even this Growth does not stop Buffett. Staying in Tokyo this spring, Buffett confirmed intentions to buy more shares, and participate in more big deals.
In addition, Berkshire recently unveiled plans to issue its own yen-denominated bonds, which help hedge against the depreciation of the yen against the US dollar as well as depreciation of Japanese stocks in dollar terms.
The technical main chart is dedicated to futures on the TOPIX index TSE:TOPIX widely known, along with the Nikkei 225 index $TSE:NKY .
The TOPIX index is an important stock market index for the Tokyo Stock Exchange (TSE) in Japan, tracking all the local companies of the TSE Prime-market division.
Buffett's mission to Japan marked, as it easy to find in the technical picture of TOPIX ( TSE:TOPIX ) - a significant moment, as a result of the breakdown of the key long-term resistance, with the prospect of further more than doubling the index TSE:TOPIX and its market value.
Topix
Ride the Japanese Wave, Don't Grab That China Falling KnifeIt was nearly three years ago when the China stock market notched a short-term peak. Recall how the world's second-largest economy was initially seen as a growth engine coming out of the worst of the pandemic. An authoritative regime in China, led by President Xi Jinping, crippled the economy's expansion trajectory through harsh ongoing lockdowns and by clamping down on many industries, one after another. Then in early 2023, hope sprang eternal that China would re-open amid a burst of consumer spending, a la what was seen during the 'revenge travel' period in the United States back in 2021 and 2022. That did not come to fruition, and the Hang Seng Index is now down by more than 50% in the last three years.
With all that turmoil going on in China, Japan's Nikkei 225 Index has continued to soar. Up more than 20% since February of 2021, the once sleepy Tokyo stock market features among the best momentum readings of all countries. Based on these trends, sticking with the 'long Nikkei, short China' trade should keep working, in my view. Another way to play it is by being long developed market stocks and avoiding emerging market funds (which still have a roughly 20% allocation to China).
Finally, while China trades at a single-digit P/E ratio today, Japan is by no means expensive. Goldman Sachs notes that the country's current 12-month forward earnings multiple is just 14.9, about average compared to its 20-year history (Asia-Pac ex-Japan is 12.3x, for perspective). Interestingly, Japan is back up to 6% of the global stock market allocation while China has sunk to just 3%. Perhaps it is indeed the land of the rising sun while China is a classic "sub"-merging market.
A solid ETF to play Japan continues to be the WisdomTree Japan Hedged Equity ETF (DXJ) which hedges exposure to the Japanese Yen. The ETF has a solid track record of outperforming other Japanese country funds.
Daily Market Analysis - THURSDAY JULY 20, 2023Greetings, traders! Welcome back to our daily Market Analysis. Today, we have gathered the top news and interesting fundamental analysis for your consideration. Let's dive in and stay informed!
The market digests positive earnings reports and economic optimism, driving various assets higher. Among them, the Australian Dollar surges on the back of robust employment data. Investors are analyzing corporate earnings reports and economic indicators to gauge the health of the global economy.
The Australian Dollar has seen significant gains following the release of strong employment data, indicating positive economic momentum in the country.
Key News:
USA - Initial Jobless Claims
USA - Philadelphia Fed Manufacturing Index (Jul)
USA - Existing Home Sales (Jun)
On Wednesday evening, Dow futures experienced a decline, following the earlier surge in major benchmark averages, reaching new 15-month highs. Traders were closely analyzing the quarterly earnings results of significant companies reported during the session. The market was in the process of digesting this corporate financial data to assess its potential impact on future trends.
Dow Jones Industrial Average Index daily chart
Yesterday, US Treasury Secretary Janet Yellen delivered a positive outlook on the current economic conditions in the United States, which was well-received by the markets. The decreasing inflation has fostered optimism about the US economy's potential for a smooth landing. Yellen's confidence in the labor market cooling down without significant distress has further contributed to this positive sentiment.
If economic data continues to support this optimistic view, the market is likely to maintain confidence in a soft economic landing, leading to a gradual decline in the value of the US dollar. The S&P 500 index experienced a 0.7% increase yesterday, approaching levels last seen in early April when inflation concerns were more pronounced.
S&P 500 daily chart
The recent retail sales data from the US also supports the idea of a soft economic landing, with consumer spending showing growth, albeit at a slower pace. Despite this positive economic outlook, the yen is currently underperforming, as carry trades gain favor in the market. In Japan, the TOPIX index experienced a 1.0% increase, and the 10-year swap rate retreated after reaching highs earlier this month, surpassing 0.70% on Friday for the first time since March.
TOPIX daily chart
Governor Ueda's comments at the G20 summit in India have played a role in the recent rebound of USD/JPY and the decline in longer-term yields. His statement emphasized that achieving the 2% inflation goal is still a distant prospect, reaffirming the unchanged assumption reiterated in the overall narrative.
USD/JPY daily chart
The market's response to Governor Ueda's comments has tempered speculation about an immediate yield curve control (YCC) change in the upcoming week. However, the Bank of Japan (BoJ) might still make adjustments to YCC during the July meeting based on updated forecasts. Although yields currently show no upward pressure and are within the 0.50% band limit, the upcoming CPI data on Friday will be pivotal and could reignite speculation depending on the results.
On Thursday, the Australian dollar saw a substantial surge after the release of better-than-expected employment data in the country. Australia's net employment rose by 32,600 in June, exceeding market expectations for the second consecutive month of a 15,000 increase. As a result of this positive economic news, the Australian dollar surged more than 0.9% to reach an intraday high of $0.6834.
AUD/USD daily chart
On the other hand, the British pound suffered notable losses due to disappointing inflation data that fell short of market expectations. As a result, the market's anticipation of further aggressive interest rate hikes from the Bank of England (BoE) diminished. However, the pound managed to stage a slight recovery, gaining 0.15% to trade at $1.2958, after experiencing a decline of over 0.7% on the previous day.
GBP/USD daily chart
The euro, on the other hand, strengthened by 0.24% against the US dollar, reaching $1.1227. Investors are closely monitoring the upcoming European Central Bank (ECB) policy meeting for additional insights into the rate outlook. Recently, ECB policymakers have adopted a more dovish stance, with some indicating uncertainty about future rate increases beyond the likely 25 basis points increase expected in July.
Japans most famous resistance about to be tested (30+ yrs)Hey guys, this japanese index called TOPIX has a long history of staying below a resistance line for about 30 years so far. Hence they call it the iron coffin lid. The question is..when will it be broken if not in these frothy times..Good scalping opportunity either way. No financial advice, just my personal opinion.
The preponderance of evidence: Topix, 1800 is magical?This is part of a series of charts which I will posting for the reader to make up his/her mind based on the weight of the evidence.
Do note, these are weekly charts which means the implications of which will occur over the next 12, 18, 24, 36 months.