Foreign investors reduced their holdings of Japanese stocks in the week ending January 4, capitalizing on gains from 2024 while seeking to minimize risks amidst an extended market closure.
During this period, overseas investors sold a net 74 billion yen ($468.3 million) worth of Japanese equities, following a surge in stock purchases the previous week, which saw net acquisitions of approximately 562.7 billion yen.
In 2024, foreign investors had acquired approximately 1.23 trillion yen worth of Japanese stocks, predominantly in the first half of the year, but they offloaded around 4.77 trillion yen in the latter half. Despite the overall strong performance, the Nikkei index posted a notable 19.22% gain last year, its second-best annual result in over a decade. However, following the resumption of trading on Monday, the Nikkei has fallen 1.15% this week as investors began to lock in profits after the recent rally.
Shifting Investment Patterns
In contrast to their stock sales, foreign investors turned to Japanese debt markets, purchasing nearly 227.5 billion yen in bonds last week, halting a three-week selling streak. Foreign demand was particularly strong for long-term bonds, which saw net acquisitions of 154.8 billion yen, alongside 72.7 billion yen in short-term instruments.
Meanwhile, Japanese investors were active in foreign markets, adding a net 325.1 billion yen worth of foreign equities for the fourth consecutive week of net purchases. However, they continued to reduce their exposure to foreign bonds, selling 331.8 billion yen in long-term debt and 4.9 billion yen in short-term securities, marking their third straight week of bond disposals.
This shift in foreign and domestic investment patterns underscores the evolving landscape of global market dynamics as investors balance risk management with profit-taking.
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