BOJ Inaction Hurt Nikkei But Due for a Comeback

After what has been a difficult start to the year for Japanese equities, being the only developed market to lag in the first half of 2014, fund managers are now upping their allocations to the sector as domestic buyers have started to weigh in.

Year-to-date the Nikkei 225 is off 5.7 percent – it has already recovered some ground from year-to-date falls of as much as 14.6 percent in April — and the Topix is 1.65 percent lower.

The figures are bleak in comparison to the near 7 percent gains seen in the S&P 500, the over 8 percent rise for the Nasdaq and the Dax’s almost 4 percent climb.

Current economic data coming from Japan has been distorted by a rise in consumption tax, which has affected inflation, retail sales and industrial production, analysts have said. Strong corporate earnings have failed to lift markets.

Chief investment strategist at JPMorgan Private Bank Cesar Perez said this was in part down to macro fund managers selling out of the region after a fresh round of monetary easing did not materialize in April after the sales tax hike.

“All macro managers that bought Japan, bought it on a vision that we are going to get more quantitative easing from (Bank of Japan governor) Kuroda and we haven’t got it,” he said.

via CNBC

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