NIKKEI225: Foreign Investment in Stocks Returns After 3-week Decline

Capital flowed back into the Japanese stock market last week ending August 10. Foreign investors have been attracted back to the stock marke

Gino Bruno D'Alessio•Friday, August 16, 2024•2 min read

nikkei225 rally slows after week-long rally

Capital flowed back into the Japanese stock market last week ending August 10. Foreign investors have been attracted back to the stock market as BoJ talk takes a less hawkish tone.

The NIKKEI225 has beaten most global markets today, and the index is up 0.65% on the day. Foreign investment in stocks increased by ¥521.9 billion after 3 weeks of declines, of which the last two weeks saw over ¥1,200 billion flow out of Japanese stocks.

Foreign investment in bonds also continued to increase, as the BoJ’s stance on interest rates and the cuts in the bond purchasing program pushed yields higher.

Usually, investors favor one asset over the other and increases in stock investment are usually met with outflows from bonds. This week investors have decided to take advantage of both rising yields and a more stable picture in monetary policy.

The stability of the yen has also played a major role for foreign stock investors. The BoJ, pushed by the Japanese government, had taken various intervention measures. The last of which led to the lates interest rate hike.

The [[USD/YEN]] has traded below 150.00 for several days touching lows on 142.00 at one point. Strength in the yen has given the market confidence that the BoJ won’t be hiking interest rates again soon to defend the local currency.

Technical View

The day chart below for the NIKKEI225 shows a bear market undergoing a major correction. The market is finding resistance at the current level around 37,885. Yesterday’s close was above a major resistance level of 37,599.

Nikkei225 up on the day, rally slows down

However, today’s candle needs to rally higher, a close at current levels would create a baby candle, and possibly lead to lower levels again. The RSI has risen above 50, which is a sign the market is gaining momentum.

The next resistance is at 68,864, which coincides with a resistance level from February. At the same time, the market is getting closer to the Ichimoku cloud, where it will find major resistance.

NIKKEI225

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ABOUT THE AUTHOR See More

Gino Bruno D'Alessio

Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.