Additionally, there are several macro points in 9984¡¯s favor.
Foreign investors¡¯ feeling concerning the broader Tokyo equity market is that it has bottomed out. These same investors are severely underweight and are afraid of missing out on the inexorable rise that follows the big fall. In 1989, at the peak, Japanese accounted for 41% of global market capitalization. Now the Japanese market cap is 7-8% of global cap. Britain accounts for 9-10% of global market cap. However, Japan¡¯s GDP is 17-18% of global total, Britain is 5-6%. Thus Japan is a buy.
Traditionally, Japanese distribution of goods and services is actually quite backward (many cars got sold by door to door salesman), 9984 has lots of room to make improvement (cars by internet); even more so than same type of companies in the US market. Thus 9984 is a buy.
At the end of any day, stock price is determined by simple supply and demand and 9984 is the only pure play in Tokyo.
Again, the cautionary note. Since January 99, the hedge funds have been borrowing Yen at the pre-October 98 pace. As Yen is borrowed to be exchanged for US$, Yen should weaken and dollar should strengthen. On a smaller scale but more persistent flow, Japanese individuals have been investing overseas, this should also weaken the Yen. However, Yen is not weakening substantially, meaning something is stopping it from weakening ¡ can only be two causes (1) Japan¡¯s trade surplus with the US, (2) repatriation of capital from US back to Japan by Japanese institutions. Yen will eventually go sharply one way or the other, depending on which forces win out.
Should Yen go down and 9984 with it (foreign people selling to protect $ based profit) the $ price of 9984 can move quite sharply downward (even though 9984¡¯s dollar based assets will be worth more in Yen terms). This, in my view, would give the true believers a second chance at accumulation.
Should Yen go up, Japanese economy will suffer and equity market will react badly, 9984 with the broader market. As 9984 is ultimately driving an overall efficiency improvement in Japan, in such a downward spiraling economy, it should be worth more. Again, 9984 should be accumulated.
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