Foreign investors sold Japanese equities worth $7.06 billion in May-June 2018

Having purchased substantially in the first half of the month, foreign investors turned net sellers once the Trump Administration raised the ante, escalating the trade dispute into a potential trade war against Chinese imports to the U.S. aimed at balancing U.S. trade deficit and boosting domestic manufacturing.

From the period of May to June 2018, midst an escalation in U.S.-China trade relations, overseas investors have sold a record number of Japanese stocks for straight two months raising concerns on the earnings outlook for local firms.

According to data compiled from Japanese stock exchanges, during the two months, foreign investors investors sold net Japanese stocks worth $7.06 billion (780 billion yen), including cash equities and futures.

 Having purchased heavily in the first half of the month, overseas investors turned net sellers once the Trump administration announced the imposition of new tariffs on imported Chinese goods to the United States.

Foreign Inflows into Japan.jpeg

Foreign Flows into Japanese market.jpeg

As a result the Topix index rose more than 2% in the first half of June 2018 but 0.9% lower in the same month.

Last Friday, Washington imposed tariffs on Chinese imports worth $34 billion with Beijing taking reciprocative measures.

Significantly, investors were also careful in investing in car and truck stocks given that the U.S. government began investigating car and truck imports to the U.S. from Japan in May 2018. If the Trump Administration were to raise auto tariffs on Japanese automakers doing business in the U.S. it would significantly raise their costs.

As per data from Japan’s Ministry of Finance, Japanese investors had bought overseas stocks worth $8.92 billion, (985 billion yen) as on June 30.

Japanese investment outside Japan.jpeg

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