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BLOOMBERG
Japan’s equities are rapidly recovering the heft they lost to their Chinese peers in the early years of the pandemic as global investors continue to seek alternatives to the world’s second-biggest economy. The gap between the market capitalisation of mainland Chinese stocks and Japanese shares has shrunk to $2.55 trillion, the least since July 2020, data compiled by Bloomberg show.
The last time Japan commanded a higher value than China was in early 2019. Japanese stocks may extend their rally as investors bet the country is finally emerging from deflation. Meanwhile, China is fast losing its position as a must-have in global portfolios as it fails to resolve several of the issues that have persistently weighed on domestic demand and confidence.
Foreigners have extended their record quarterly selling streak in mainland equities as China’s CSI 300 Index lost more than 4% this year. The gauge ended at its lowest level since January 2019 on Wednesday.
In contrast, international demand helped propel Japan’s Nikkei 225 and Topix gauges to their highest levels in 34 years this week. Overseas investors bought a net $6.5 billion of the nation’s stocks last week, the biggest weekly purchase since early June.
The Tokyo Stock Exchange has already reclaimed its position as Asia’s biggest equity market after a strong rally since the turn of the year lifted the bourse’s market capitalisation above that of the Shanghai Stock Exchange. Japanese equity gauges have been the world’s best-performing major national equity indexes in the past 12 months, with each gaining more than 25%.
The latest Bank of America survey of fund managers said 59% of the respondents picked Japan as the “favorite market” in Asia, while they pared China allocations by 12 percentage points to a net 20% underweight, the lowest in more than a year.