HEDGE FLOW Hedge funds dumped Japanese stocks ahead of upper house election, says Goldman
Sunday's election dealt a major blow to Prime Minister Shigeru Ishiba and his ruling coalition, just as investors who had been selling Japanese bonds and stocks in the run up to the election had expected.
Japan's benchmark Nikkei 225 (.N225), opens new tab and Topix (.TOPX), opens new tab have dropped 1.7% and 0.6%, respectively so far this month, bucking the rally in other stock markets.
Both indexes closed down on Friday.
Sunday's outcome further weakens Ishiba's grip on power, even though he has vowed to remain party leader to complete trade tariff negotiations with the United States.
The selling by hedge funds between July 11 and July 17 was mainly driven by increased short bets and a relatively moderate reduction in long positions, according to a Goldman Sachs prime brokerage note on Friday, seen by Reuters on Monday.
Markets in Japan were closed for a holiday on Monday, but the yen strengthened while Nikkei futures rose slightly, as the election results appeared to be already priced in.
Overall, hedge funds remain overweight Japan compared to its weight in the MSCI World Index (.MIWO00000PUS), opens new tab by 0.6%, Goldman said.
Analysts said uncertainty about the prime minister's future has increased and could lead to "policy paralysis" and larger fiscal deficits.
"This marks the first time since 1955 that the LDP-led government has fallen below a majority in both the lower and upper house, potentially increasing political instability in Japan," MUFG analysts said in a note.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
29 minutes ago
- Reuters
BOJ may be behind the curve on inflation risk, government council member says
TOKYO, Aug 7 (Reuters) - The Bank of Japan may be behind the curve in dealing with the risk of high inflation, one private sector member of the government's top economic council was quoted as saying on Thursday. "In the past, we used to debate whether inflation would reach the BOJ's 2% inflation target or not. But now, inflation is above 2%," the member told a meeting of the council, according to a government official who attended the meeting and briefed reporters. "I'm worried that monetary policy is already behind the curve," the member was quoted as saying, adding that prolonged price rises were already affecting people's livelihood and their inflation expectations. Another private sector member said Japan must now undertake policies to stabilise inflation around 2% unlike in the past, when it focused on accelerating price growth to that level. "I respect the projections made by the BOJ and Cabinet Office that inflation will eventually stabilise and slow below 2%. But elevated inflation affects the public by pushing down real wages," the member was quoted as saying. The remarks underscore a growing concern held by business and academic circles over persistent price rises, which have kept inflation above the BOJ's 2% target for over three years. The BOJ exited a decade-long stimulus last year and raised its short-term policy rate to 0.5% in January, based on the view Japan was on the cusp of durably achieving its 2% inflation target. But it has held rates steady since then and signalled its intention to tread carefully in raising borrowing costs, on the view that recent inflation was driven largely by supply shocks, rather than robust demand. The government's top economic council consists of the prime minister and key cabinet ministers such as the finance minister, as well as BOJ Governor Kazuo Ueda. There are also four private sector members including Takeshi Niinami, head of beverage maker Suntory Holdings, and BNP Paribas strategist Mana Nakazora.
Reuters
29 minutes ago
- Reuters
S&P affirms China's sovereign credit rating at A+ with stable outlook
Aug 7 (Reuters) - Ratings agency S&P Global on Thursday affirmed China's long-term credit rating at A+ and said its strong fiscal stimulus will keep economic growth resilient amid headwinds from the property sector and tariff pressures. S&P said the outlook on China's rating is "stable." "The stable outlook on the long-term sovereign credit rating reflects our view that China will return to self-sustaining economic growth of 4% or more annually over the next one to two years," S&P said in a statement. "This will allow the government to gradually reduce policy support for the economy over the next several years." S&P said it could lower China's rating if it expects the government to pursue larger fiscal stimulus over the next three to five years, but may raise the rating if fiscal consolidation proceeds faster than anticipated. S&P also affirmed China's "A-1" short-term foreign and local currency sovereign credit rating. China's finance ministry said on Thursday it was glad to see S&P had reaffirmed China's sovereign credit ratings, and pledged to "dynamically" adjust policy reserves and strive to achieve the annual growth target. In April, Fitch downgraded China's sovereign credit rating, citing rapidly rising government debt and risks to public finances, as policymakers gear up to shield the economy from rising U.S. tariffs. The world's No.2 economy grew at a slightly faster pace than expected in the second quarter. But July economic data so far have been mixed, with manufacturing activity shrinking for a fourth straight month even as exports posted an unexpected surge.
Reuters
29 minutes ago
- Reuters
Germany's SAP to invest 150 million euros in Vietnam R&D centre
HANOI, Aug 7 (Reuters) - German software maker SAP ( opens new tab will invest 150 million euros ($175.13 million) in a research and development centre in Vietnam over the next five years, the firm said on Thursday. SAP Labs Vietnam will be located in the business hub Ho Chi Minh City and will have 500 employees by 2027, it said in a statement. ($1 = 0.8565 euros)
