December 28, 2013 5:49 am JST

Individuals roared back to Japanese stock market in 2013

TOKYO -- Retail investors in Japan returned to equities this year, finally able to unload shareholdings after the market rally wiped out paper losses.

     Individuals sold upwards of 8 trillion yen ($75.4 billion) more in stocks than they bought between January and the third week of December, a calculation using Tokyo Stock Exchange data released Friday shows. At this rate, the figure is on track to set a new annual record.

     Retail investors accounted for 31.9% of all commissioned transactions during the period. Their share will likely stay above 30% for the first time in seven years for 2013, marking a significant rise from the lower 20% range seen between 2010 and 2012.

     Individuals apparently felt more comfortable with stock investing after margin trading was deregulated in January and rules on short sales were eased in November. These steps "increased earnings opportunities, prompting investors to trade more frequently," says Takumi Usuda of Securities.

     Investors' appetite for short-term trading also sharply recovered. While they have been net sellers on a cash basis to the tune of nearly 11 trillion yen so far this year, they have bought close to 3 trillion yen in shares on margin on a net basis, a level not seen since 2005.

     Retail investors also jumped into the market for startup shares and newly listed stocks. The TSE Mothers Index has surged 130% since the beginning of the year, and trading in such stocks as GungHo Online Entertainment and mixi has swelled.

     Toward year-end, investors rushed to unload shareholdings ahead of the end of a tax break on capital gains, according to an official at a domestic brokerage.

     Such selling by individuals is being more than offset by the aggressive purchases by foreign investors, who have bought a net 14.61 trillion yen in shares so far this year -- a figure set to break the record.