TOKYO -- Foreign investors accounted for a record 75.3% of brokerage trading of equities in Japan during the second week of February, as hedge funds and other short-term players make share prices swing even more wildly in Tokyo.
Foreigners sold a net 573 billion yen ($5.04 billion) worth of Japanese shares over Feb. 8-12, the Tokyo Stock Exchange said Thursday. The figure declined slightly from 611 billion yen the week before but remains high. These players have been selling in net terms for six straight weeks, unloading over 2 trillion yen worth of Japanese issues since the start of the year.
The Nikkei Stock Average dropped 11% last week, as investors unwound their shareholdings on concerns of a global economic slowdown.
"Oil money and financial institutions that faced increased credit risks may have been forced to withdraw," said Hiroshi Matsumoto of Pictet Asset Management.
"Trading by foreign investors seems to have increased since the beginning of the year, and most of it is in short-term trades," said Yukio Ikehata of Daiwa Securities. Their share of activity is climbing as well. Overseas traders on average accounted for 68% of trading in 2015, but this year's average so far is 74%.
Stock futures also have dictated movements of the Nikkei index recently. "Trading of stocks and stock futures that comes with arbitrage make up a significant portion" of foreign trading, Ikehata said.
When short-term investors abroad frequently buy and sell shares to secure a profit, volatility in the market increases. The Nikkei index saw an intraday spread of over 400 points in 18 of the 32 sessions so far this year, the largest being 911 points on Monday.
"When I speak with clients overseas, they frequently ask me whether it's a good time to buy yet," Matsumoto said. Many foreign investors think Japanese stocks are cheap with the benchmark index floating in the 16,000 range. Once someone starts buying, the trend could easily snowball.
Domestic investors, excluding retail players, accounted for just over 8% of trading. They seem to be shying away from Japanese equities, unable to gauge what the market might do next.