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Stocks

Institutional investors say they will remain overweight on Japan stocks

QUICK survey for November reflects strong buying mood

TOKYO -- Japan's institutional investors remain overweight on domestic stocks, a recent survey shows.

In the QUICK monthly survey for November, released on Monday, 42% of respondents said they will remain overweight on Japanese stocks, up 7 percentage points from the previous survey and the highest point since last December.

More institutional investors expect Japanese stocks to remain high in the wake of listed companies' strong half-year earnings.

The survey, conducted from Oct. 30 to Nov. 1, asked investors to rate Japanese stocks on a scale of 1 to 5 (significantly underweight, slightly underweight, neutral, slightly overweight, significantly overweight). Combined, respondents who said they would remain significantly overweight and slightly overweight made up 42% of the total.

Last December, the corresponding figure was 46%. That survey was taken during the so-called "Trump rally," after Donald Trump's surprise victory in the U.S. presidential election.

In the most recent survey, 77% of respondents said they will maintain their positions. However, 16% said they will increase their positions, up 6 points from the October survey.

"Japanese stocks are expected to rise further as foreign investors continue their buying," said Takeshi Kamoshita, a portfolio manager at Asset Management One.

Respondents' average forecast for where the Nikkei Stock Average will be in a month was 22,130, up nearly 1,500 points from the October survey and the highest reading since the July 1996 survey.

The Nikkei average is actually much more buoyant, having closed Tuesday trading at 22,937.60.

A growing number of respondents said they find basic materials stocks attractive. The diffusion index -- the ratio of investors saying they will increase their positions minus the ratio of investors saying they will reduce their positions -- was plus 16%, its highest level since September 2016.

Seiji Arai, a strategist at Mitsubishi UFJ Morgan Stanley Securities, said high demand for chips has convinced investors to remain overweight on basic materials stocks.

Meanwhile, the diffusion index for pharmaceutical and food stocks hit an 11-month low at minus 27%.

With economies rising around the world, institutional investors are selling shares in pharmaceutical companies, whose earnings are less affected by economic fluctuations, said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

(Nikkei)

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