Goldman Sachs: Nikkei Index Soars 30%, Outperforming US Stocks; Influx of US Capital at Highest Rate Since "Abenomics"

Goldman Sachs stated that due to the high returns on the Japanese stock market compared to the US stock market, American investors are increasingly buying Japanese stocks focused on technology and artificial intelligence. Bruce Kirk, the chief strategist for Japanese stocks at the bank, said, "The growth rate of US funds entering Japan has now reached the fastest level since 'Abenomics'." He pointed out that American investors' active participation in the Japanese stock market is at its highest level since October 2022, and he has also received frequent meeting requests himself. The inflow of US funds reflects the strong performance of the Japanese stock market priced in US dollars this year. With the yen appreciating by 2.5% and the stimulus policies of Prime Minister Fumio Kishida creating new optimism, providing support for the Japanese stock market. The benchmark Nikkei 225 Index has risen by about 30% in US dollar terms this year, far surpassing the 14% increase in the S&P 500 Index. The increase in participation of US funds may signal a turning point for the Japanese stock market, indicating that the market may shift from value stocks to growth stocks. Driven by initiatives from the Tokyo Stock Exchange and government support for investors, value stocks have outperformed growth stocks for four consecutive years since 2021. "The increased participation of US investors is significant, as they tend to lean towards themes related to technology and artificial intelligence," Kirk said in an interview. Kirk believes that there is still room for further inflow of foreign funds. Compared to the peak during the 'Abenomics' period, global investors' net position in Japanese stocks is still relatively low, leaving room for further purchases. He stated that the continued demand for diversified investments from global investors may sustain this trend. Data released by the Japan Exchange Group shows that in the last two weeks of October, foreign investors net bought 384 billion yen (approximately $25 billion) worth of Japanese stocks through the cash and futures markets. However, considering that the Nikkei index entered overbought territory in late October, Kirk stated that he would not be surprised if the market consolidates.