2023年2月12日日曜日

Outlook for the Nikkei average this week [12-February 2023]

 [Fundamental viewpoint]

In the U.S. market last week, stock indices fell for the week as long-term interest rates rose and selling prevailed, especially in high-performing growth stocks, which are easily perceived as relatively overvalued.

Weekly change NY Dow:-0.17% NASAQ:-2.41% S&P 500:-1.11%.

                                       

On the other hand, medium- to long-term risks include concerns about a prolonged conflict in Ukraine, energy costs, concerns about a slowdown in the global economy due to rising interest rates, and concerns about the bursting of the real estate bubble and a slowdown in China. This also raises concerns about the arrival of stagflation. In addition, geopolitical risks in East Asia and the Middle East continue to require attention.

The difference in the yield spread between the Japanese and U.S. markets is that the Japanese market is 4.51 points cheaper than the U.S. market, considering the announced OECD nominal GDP forecast for 2024. The reason for the undervaluation is the difference between the S&P 500's PER of 18.6and the Nikkei 225's expected PER of 13.0 and the current fiscal year, as well as the difference in interest rates and GDP growth between the U.S. and Japan.

This means that if the GDP growth rate difference between Japan and the U.S. in 2021 expands by another 4.5 percentage points compared to the OECD forecast (Japan is revised downward or the U.S. is revised upward), or if the PER of the Nikkei 225 stocks for the current fiscal year is about 31.5 if the Nikkei 225 is about 66990 yen compared to the current price of the Nikkei 225. The Japanese market is undervalued by about 39310 yen in the medium to long term.

 

Fundamentally, the Japanese market is 39310 yen less attractive than the US market. Last week, the weakness in the Japanese market increased.

 

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

    Rising US market

② Increase in profit forecast for the current fiscal year above the previous year's level

Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

Upward revision of Japan's 2023 GDP estimate (now +3.5%) by OECD

Foreign investors over-buying

 

Looking at recent movements

    Last week, the NYDow weekly trend was negative. The daily footstep is above the 200-day line and the clouds of the equilibrium chart. NASDAQ weekly trend was negative. The daily footstep is above the 200-day line and above the clouds of the equilibrium chart. This week, we will be watching to see if the NYDow can return above the 25-day average line.

    As a result of the announcement of quarterly financial results, the forecasted ROE for the Nikkei225 index stood at 9.0, 0.1 percentage point worse than three months ago. The profit growth rate was +3.7, a deterioration of -2.5 percentage points from three months ago.

    U.S. long-term interest rates rose and the interest rate differential between the U.S. and Japan widened from 3.04 to 3.24, causing the dollar/yen to move toward a weaker yen in the range of ¥131 to ¥129. The dollar index rose +0.57% for the week.

    The OECD's nominal GDP growth rate for Japan and the U.S. in 2024 is expected to be +2.51% for Japan and +3.54% for the U.S., so the Japanese market is 1.03 percentage points worse in this aspect.

    The February 1 week was oversold; the February 2 week was likely overbought, and this week is expected to be oversold. Last week, of the five points, was bullish and was bearish. ①②③⑤ are expected to have an impact.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 4.3 points (about 1180 yen when calculated to the Nikkei 225) in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ. On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 4.1 points in the medium to long term (about 1130 yen when converted to the Nikkei 225).

Weakness in the Japanese market relative to the U.S. market declined during the week. The VIX, a measure of U.S. market volatility, rose to 20.5 for the week. The Nikkei VI fell to 16.2 for the week. This suggests that the U.S. market is somewhat pessimistic, but the Japanese market is optimistic.

 

The Nikkei is above the 9th and 25th lines. A short-term trend has a "green light".

The Nikkei is above the clouds in the Ichimoku Kinko Hyo. The overall deviation rate was +5.5%, and the deviation rate from the 200-day moving average line was +1.6%. The medium-term trend has a "green light" because 3 factors are positive.

 

In the US market, the NYDow is below the 9-day line but above 25-day line and 200-day lines. It is above the clouds of the Ichimoku Kinko Chart. NASDAQ is below the 9-day line but above 25-day line and 200-day lines. It is above the clouds of the Ichimoku Kinko Chart.

It is a “yellow light” in the short term and a “green light” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market from a fundamental perspective, concerns about a global economic slowdown due to the spread of the new coronavirus have receded, but risk factors include inflation and rising interest rates due to the Russia-Ukraine war and economic slowdown due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of the Chinese real estate bubble and credit contraction, and geopolitical risks in the Middle East and East Asia.

 

Recent LIBOR rates have been on the rise, and we continue to be wary of a resurgence of financial instability.

 

Looking at the technical aspects, the U.S. market is in a medium-term up trend and a short-term no trend. The Japanese market is in a medium-term up trend, and the short-term is up trend.

 

Analyzing the foreign exchange market, the yen has been trending lower since early 2021, but has turned stronger since November. This week, the yen is expected to be in the 129-132 yen range.

 

This week in the U.S., inflation, producer prices, retail sales, and several speeches by Fed officials will be the main focus of attention. Also in the U.K., the Consumer Price Index, Retail Sales, and Labor Statistics will be released. In addition, Japan's fourth quarter GDP growth and India's inflation rate will also be released.

 

Last week, the Nikkei 225 remained within the assumed range. The upper price was about 160 yen below the assumed line and the lower price was about 520 yen above the assumed line.

This week, the Nikkei 225 is expected to move between the Bollinger Band +2σ (currently around 28200 yen) on the upside and the 25-day line (currently around 26980 yen) on the downside.

This week, the U.S. Consumer Price Index for January will be the most closely watched, but with U.S. long-term interest rates and the VIX trending higher, it will be a week of selling pressure on the Nikkei 225.

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