Amben: Recent market fluctuations may be an overreaction, with no significant changes in the Japanese economy
The Director of Multifaceted Asset Investment Program at Ambit Southeast Asia stated that the recent market volatility may be an overreaction, with no significant changes in the Japanese economy. US data is weak, the economy is cooling down, but there are no major financial imbalances. The Federal Reserve has room to cut interest rates to support the economy and can choose to stop quantitative tightening. If economic growth slows down and a recession occurs, it may pose obstacles to the recovery of non-tech sector profits. The Bank of Japan has shifted to a hawkish stance, causing the US dollar to weaken, leading to significant selling in Japanese stocks and a sharp appreciation of the yen. Over the past 10 years, during periods of significant selling in the Japanese market, it often tends to decline excessively, but the market tends to recover quickly
According to the information obtained by Zhitong Finance and Economics APP, Ray Sharma-Ong, Managing Director of Multi-Asset Investment Solutions at Ambank Southeast Asia, stated that he observed weakness in various U.S. data, including the decline in ISM manufacturing, weak wage growth, rising unemployment rate, and slowing wage growth. Ambank believes that the data indicates an economic slowdown rather than a turnaround, and there is no significant financial imbalance. The Federal Reserve also has a 525 basis point rate cut space to support the economy, and can choose to stop quantitative tightening and restart quantitative easing when necessary. If the analysis is correct, it suggests that the recent market trends may be considered an overreaction.
Ray Sharma-Ong also pointed out that if economic growth slows down and a recession occurs, it may pose a resistance to the profit recovery seen in non-tech industries. As the expansion momentum may come to a halt, the profitability of tech stocks may outperform cyclical stocks of non-tech sectors. If the market favors earnings and growth, tech stocks will once again lead the market.
Regarding Japan, Ray Sharma-Ong mentioned that the Bank of Japan's contrarian shift to a hawkish stance, weak U.S. data leading to a softening of the U.S. dollar, and various factors such as unwinding of carry trades by investors exacerbated the significant selling pressure on Japanese stocks, resulting in a sharp appreciation of the yen. From the perspective of economic tone, there have been no significant changes in the Japanese economy. Unwinding of carry trades has driven many selling pressures. He also stated that the Japanese market tends to oversell during periods of significant selling. In the past 10 years, the TOPIX index has experienced three corrections with declines of over 10%, and the market has quickly recovered after each correction