Japan stocks to rise in 2018 underpinned by corporate profits
TOKYO: Japanese stocks are forecast to rise five per cent over the rest of this year, with stronger corporate profits expected to underpin sentiment, but selling by foreign investors could cap the upside, a Reuters poll found.
In recent weeks, Sino-US trade frictions and a selloff in emerging market currencies have heightened risk aversion, pushing Japanese stocks to one-month lows, as investors flocked to the safe-haven yen. A stronger yen cuts Japanese manufacturers’ profits made abroad when repatriated.
But an easing in US-Mexico trade tensions over the North American Free Trade Agreement (NAFTA) provided relief to the market this week.
Although lingering trade frictions could limit the upside, Japanese stocks will move up steadily towards the end of the year but then flatline, according to median estimates from 26 analysts and fund managers polled by Reuters in the past week.
The Nikkei share average is expected to trade at 24,000 at year-end, up five per cent from Thursday’s close of 22,869.50, the median forecast showed. It is also seen trading at 24,000 at mid-2019 and end-2019.
Forecasts for end-2018 ranged from 22,000 to 26,000. They were 19,000 to 27,500 for mid-2019. In the previous poll in June, forecasts ranged from 21,000 to 26,000 for end-December 2018.
US Federal Reserve Chairman Jerome Powell last week emphasised the central bank’s push to raise interest rates despite Trump’s criticism of higher borrowing costs.
“We can expect a strong US economy, and the dollar-yen rate is higher than what most Japanese companies have expected this fiscal year. An expected Fed rate hike will likely prop up the dollar against the yen,” said Jun Kitazawa, an equity strategist at Miki Securities, who forecast the Nikkei to trade at 24,000 at yearend and 25,000 in mid-2019.