This article is about a little-reported alternative indicator
Japanese investor domestic stock purchase intentions rise as foreign investors flee, according to a survey buried on page 17 of last night’s Nikkei Shimbun.
The survey was carried out by a company called QUICK. As you can see below, Japanese investors intentions to purchase local stocks are at a record. The bold line indicates the proportion of respondents who said they want to increase their allocation to domestic stocks, and the lower line indicates the proportion who said they want to decrease it. The X axis runs from October 2011 to June 2012.
Interestingly, when looking at intentions by sector, the most bullish reading (proportion indicating they want to add minus that saying they want to reduce) was in automobiles 31%, followed by steel and equipment (9%), materials (7%), construction and real estate (7%), electronics and precision machinery (5%), communication (2%), consumables (2%), drugs and pharmaceuticals (0%), financials (-9%), and utilities (-55%).
Japanese domestic stock survey
What is interesting here is that investor sentiment is mostly THE contrary indicator par excellence. It a fact, it is essentially the only “market indicator” that I ever pay attention to. However, clearly, Japanese domestic investors have their heads screwed on somewhat more firmly than those elsewhere. The media in the last few weeks has focused on how large a proportion of Japanese stocks traded by foreign investors (about 70%), while they are in a minority holders (about 30%). Also interesting is the definite preference for cyclical and economically-sensitive stocks from relative to those perceived as stable. There is no doubt that “trash” stocks have taken a pounding, but I am not sure if I am brave enough to step away from stocks with predictable earnings streams. Still, this is clearly one to watch.
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