A bear market in Japanese stocks is “almost inevitable” as a recent speech by US Federal Reserve Chairman Jeron Powell pulled the rug out from under the relief rally that markets have been on since mid-July, an executive said. equity strategy of Citigroup Global Markets Japan which is cited by the Bloomberg agency.
According to Ryota Sakagami, the Nikkei 225 could fall as low as 24,000, while the Topix could hit as low as 1,600 – about 14% and 18% lower than their current levels, respectively – amid increasing recessionary risk for the global economy and the effects of the reduction of liquidity internationally due to monetary tightening.
The bearish assessment comes as the Nikkei 225 this month came within a breath of covering its 14% year-to-date loss. Now, with the market’s hopes for a dovish turn from the Fed dashed, “intensified downward adjustment for Japanese stocks in the near term” is expected, notes the Citi analyst.
“We feel that a bear market for Japanese equities in the near term is almost inevitable and we estimate that investors will shift from growth stocks to value stocks and from cyclicals to defensive stocks.”
The Nikkei 225 fell 2.7 percent on Monday, while the Topix lost 1.8 percent amid a global selloff after Powell’s comments in Jackson Hole.
This is the biggest daily drop for both indices in two months.
Source: Capital
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