Japanese equities keep their shine for foreign investors
Strong earnings per share fuel five-week buying streak
TOKYO -- Overseas investors bought more shares than they sold in the Japanese market for five consecutive weeks up to the first week of May, heartened by brightened earnings prospects for domestic corporations.
Foreigners bought 158.3 billion yen ($1.39 billion) worth of Japanese equities on a net basis during that week, according to Thursday's filings combining data from the Tokyo and Nagoya stock exchanges. Although the amount dropped from the previous week, the fact that there were only two sessions due to Golden Week underscores the high-level performance.
In overall net terms, international investors shelled out about 910 billion yen on a net basis during the five-week period, the longest streak since the six weeks starting the second week of November, around the time Donald Trump was elected U.S. president.
Market players are taking notice of the profitability of Japanese enterprises. The earnings per share of Nikkei Stock Average constituents topped 1,300 yen for the first time ever.
The price-earning ratio, however, is still stuck at around 15.3 as of Wednesday. Compared with U.S. stocks boasting a P/E of approximately 19, Japanese equities are undervalued. The depressed multiple of Japanese stocks are a draw amid evidently overvalued global equities, especially those on Wall Street, said Frank Benzimra at Societe Generale.
Many market observers believe that earnings per share will continue climbing in the immediate future. The yen has softened into the 114-per-dollar range, meaning export-heavy firms could add to earnings.
Toyota Motor, the poster boy for Japanese exporters, closed 1% higher on Thursday. On Wednesday, the automaker projected shrinking profits for the current fiscal year, which led to a sell-off during Thursday's morning hours as well.
But Toyota managed to regain momentum later in the day. "Toyota's assumed 105-yen exchange rate is conservative," said Takashi Hiroki at Monex, a Tokyo-based brokerage. "The company also has a tendency to upwardly revise earning levels with time."
The Nikkei average on Thursday once again stopped shy of the 20,000 mark, but "it wouldn't be surprising if it rises to around 21,000 points given the current EPS level," said Tomoichiro Kubota at Matsui Securities.