Japanese Stocks Hit Bottom Amid Rate Hike Angst and Recession Concerns - Citi Analysts
In a recent note, Citi analysts have suggested that Japanese stocks may have hit bottom after experiencing significant losses due to rate hike fears and worries about a potential U.S. recession. While a recovery may still be a little ways off, the recent rebound in the Nikkei and TOPIX indexes on Tuesday is a positive sign.
Despite the bounce back, both indexes are still in bear market territory following steep declines earlier in the week. Citi has adjusted its year-end targets for the Nikkei and TOPIX indexes downward, reflecting the current market conditions.
The losses in Japanese stocks were exacerbated by factors such as a stronger yen and a more hawkish stance from the Bank of Japan. Additionally, the unwinding of the yen carry trade has added to the market volatility.
Looking ahead, Citi expects risk-off trades to dominate the near-term outlook for Japanese markets. However, the brokerage remains optimistic about the long-term prospects for Japanese stocks, citing factors such as improving inflation, corporate governance changes, and a potential rebound in local demand.
Overall, while a recovery may not be immediate, Citi believes that Japanese markets are close to a bottom and could see a turnaround with the right conditions in place. Investors should keep an eye on key factors such as U.S. economic conditions, global stimulus measures, and the BOJ's policy stance for signs of a potential market recovery.