Nikkei 225: Ideal Entry or More Downside to Come?

Phillip Nova高级投资分析师林知霖先生

Losses accelerated in the Nikkei 225 today, with the Index down by -3.22% as of close on 18 Nov, the biggest drop since April 9. This comes amid a diplomatic dispute between China and Japan, alongside worries about excessive fiscal spending domestically.

• Japan tourism shares led losses on 17 Nov, while a tech selloff on 18 Nov further pushed the Nikkei 225 below 50,00 and towards 48,702.

CHINA TENSIONS:

• Diplomats from both sides are set to meet in Beijing to discuss recent tensions around Takaichi’s recent comments on Taiwan.
• Takaichi became the first sitting PM to publicly link a Taiwan Strait crisis with the possible deployment of Japanese troops.
• China has demand Takaichi retract her statement and has warned its citizens and students against traveling to Japan. 
• Beijing has also threatened to impose a flurry of economic reprisals.
• Foreign Minister Toshimitsu Motegi said Japan will “take appropriate steps” as needed, and that lawmakers have been working on multiple fronts to clarify Takaichi’s remarks.

On the ground:

• State-owned travel agencies have cancelled group bookings made months in advance. Chinese airlines have offered to waive cancellation fees and allow flexible rebooking options.
• Imperial Hotel Ltd said it started receiving notifications of postponements and cancellations for corporate events and stays
• Kintetsu Group reported that cancellations for Nov and Dec were higher than usual.
• The Japan Association of Travel Agents reported no major disruptions.
• CEO of ANA Holdings Shinichi Inoue said there is no changes to booking trends from China to Japan, or vice versa.
• On Xiaohongshu, users were split, some posted screenshots of cancelled itineraries while others insisted they would go ahead with their plans.
• Nevertheless, tour groups make up only 11.9% of chinese tourists to Japan, independent travel makes it harder for authorities to influence outbound travel.

17 NOV:

• Shiseido (-9.08%), Don Quijote parent Pan Pacific International (-5.27%), Isetan Mitsukoshi (-11.31%), J Front Retailing (-5.36%),
• Takashimaya (-6.18%), ANA holdings (-3.35%), hotel chain firm Kyoritsu Maintenance (-8.14%)
• ASICs (-4.01%), Muji parent Ryohin Keikaku (-9.39%), Seven & i (
• Tokyo Disney Resort operator Oriental Land (-5.68%), 和 Uniqlo parent Fast Retailing (-5.29%) were all down
• On 18 Nov, Pan Pacific (+1.76%), Oriental Land (+0.75%) were among the few who rebounded.
• Opinion: popular international brands like UNIQLO, ASICs, Shiseido, Ryohin Keikaku, could see boycotts within China if tensions do not ease

FISCAL SPENDING:

40-year JGB yields jumped to 3.68%, the highest since its debut in 2007 due to rising uncertainty regarding Japan’s finances.

• An upcoming economic package from PM Sanae Takaichi could strain the government’s finances.
• A group of lawmakers reportedly urged Takaichi to craft an extra budget worth about ¥25 trillion to fund the stimulus, exceeding the ¥14 trillion initially reported by local media and the ¥13.9 million rolled out by former PM Ishiba a year ago.

TECH VALUATION FEARS:

• Tech shares fell the most, with Softbank (-7.47%), cablemakers Furukawa Electric (-9.49%), Sumitomo Electric (-9.06%), and Fujikura (-9.90%), as well as chip-gear makers Ibiden (-8.48%) all down.

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