Reuters blog archive
from Global Investing:
The jury may be out on whether Messrs. Abe and Kuroda will succeed in cajoling the Japanese economy from its decades-long funk but the cash is betting they will. Domestic and foreign investors have stampeded for Tokyo equities, and Morgan Stanley has been crunching the numbers.
Since 2005, Japanese investors built up a 14 trillion yen (over $140 billion) portfolio of foreign equities. But between January-March 2013, they offloaded a third of this -- about $39 billion. Going back to July 2012 when they first started bringing cash home, the Japanese have sold $53 billion in foreign equities, or 36 percent of equity holdings.
If one were to include all foreign portfolio investments, they sold a net $74 billion worth of assets in the first three months of 2013. Morgan Stanley says this is the the most since 2005. You can see their graphic below (click on it for a bigger version).
Not surprising then that the Nikkei has been on a roll with returns of 34 percent this year. Aside from the Japanese money, foreign cash has also flooded in -- foreigners have bought $23 billion worth of Japanese equities in the first two months of 2013, according to Japanese government data. Broadly, that is a 7 percent rise in cumulative holdings. Asian investors' holdings alone have jumped 26 percent.
It wasn't just the Nikkei. Euro zone government bonds rallied following Japan's announcement of a massive new monetary stimulus. That sent yields on the debt of several euro zone countries to record lows on bets that Japanese investors might be switching out of Japanese government bonds into euro zone paper, or might soon do so.
The Bank of Japan on Thursday announced extraordinary stimulus steps to revive the world's third-largest economy, vowing to inject about $1.4 trillion into the financial system in less than two years in a dose of shock therapy to end two decades of deflation.
from Global Investing:
The Bank of Japan unleashed its full firepower this week, pushing the yen to 3-1/2 year lows of 97 per dollar. Year-to-date, the currency is down 11 percent to the dollar. But those hoping for a return to the carry trade boom of yesteryear may wait in vain.
The weaker yen of pre-crisis years was a strong plus for emerging assets, especially for high-yield currencies. Japanese savers chased rising overseas currencies by buying high-yield foreign bonds and as foreigners sold used cheap yen funding for interest rate carry trades. But there's been little sign of a repeat of that behaviour as the yen has fallen sharply again recently .