Chinese investors fuel Nikkei 225 bull run, pour US$215 million into ETFs tracking Japanese stocks

The medium and longer term outlooks for Japanese equities ‘remain very positive’, Lazard Asset Management says

The buying binge has enlarged five funds issued by Chinese firms to 1.54 billion yuan (US$215 million), Bloomberg data shows

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A monitor in Tokyo displays the Nikkei 225 index in this file photo from Thursday. Global net inflows into Japanese shares amounted to 820.4 billion yen last year, according to US research firm Morningstar. Photo: Kyodo

Published: 5:00pm, 12 Jan 2024Updated: 7:12pm, 12 Jan 2024

Chinese investors have been piling billions of yuan into exchange-traded funds (ETFs) that track Japanese stocks, fuelling a bull run that has helped Tokyo’s benchmark index surpass its counterpart in Shanghai.

A weak start to the year for Chinese stocks has prompted some investors to shift to other markets with a brighter outlook in Asia and globally. Japan’s Nikkei 225 index, as well as the Topix gauge of a broader pool of stocks on the Tokyo exchange, has hit the highest levels since 1990 as the country has managed to walk out of deflation. Japan’s bourse operator has also taken a slew of initiatives that require listed companies to return more value to shareholders.

As a result, the Nikkei 225 and Topix have risen by more than 5 per cent this year, trouncing the CSI 300 Index of the 300 leading companies traded on the Shanghai and Shenzhen exchanges, which has recorded a 4.3 per cent decline.

“As we look forward to 2024, our medium and longer term outlooks for Japanese equities remain very positive, driven by the two key themes of corporate governance improvement and the shift to inflation from deflation,” Lazard Asset Management, a global money manager that oversees US$193.6 billion in assets, said in a strategy report this week.

“We would view a near term market pullback in Japan as an opportunity.”

In a sign of how frantic the trade is, daily turnovers of five index-based ETFs tracking Japanese stocks issued by Chinese mutual-fund firms have jumped to multi-year highs. The fund prices’ hefty premiums on their net asset values have prompted money managers to warn of potential investment risks.

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