Title: Japanese Stocks Rebound 9% After Black Monday Sell-Off: JPMorgan Analysts Optimistic
In a recent note, JPMorgan analysts highlighted the significant rebound of Japanese stocks on August 6, recovering 9% after a sharp selloff that was worse than Black Monday. The analysts pointed out that real wage growth has turned positive, signaling a gradual end to deflation, which, combined with a meeting of key financial institutions, has sparked market optimism.
Despite the rebound, JPMorgan cautions that the market remains volatile following a sharp drop in early August that erased all year-to-date gains. The selloff spread to global markets due to the unwinding of JPY carry trades post the July 31 BOJ meeting, leading to JPY appreciation against USD and a broad selloff in Japanese stocks.
JPMorgan analysts stress the importance of monitoring the risk of a US recession but identify support levels at 2,450 for the and 34,000 for the . These support levels are underpinned by factors such as the significant sell-off, prospects for the end of deflation, progress on corporate reforms, and positive wage growth.
Looking ahead, the analysts anticipate upside potential over the medium term once market turmoil subsides. They believe that even if a recession develops, Japanese stocks are not likely to face significant downward pressure compared to US stocks.
In terms of investment strategy, JPMorgan recommends focusing on sectors resilient to JPY appreciation, with a domestic focus, defensiveness, and strong shareholder returns. They are overweight on industrial electronics, IT services, financials, and consumer-related sectors. Key investment themes post-volatility include cutting-edge technology, digital transformation, renewable energy, aerospace and defense, and friendshoring.
Overall, while volatility may persist, JPMorgan sees potential for a medium-term recovery in Japanese stocks.
Analysis: JPMorgan analysts are optimistic about the recovery of Japanese stocks following a significant rebound after a Black Monday-like sell-off. They highlight positive factors such as the end of deflation, progress on corporate reforms, and strong wage growth. Despite ongoing volatility and global market concerns, JPMorgan remains confident in the medium-term potential for Japanese stocks and recommends investment strategies focused on resilient sectors and key themes for post-volatility opportunities.