Japanese equities have surged to record highs since September, and Morgan Stanley has examined who is driving the rally.
“Japanese equities have been hitting record highs since September. The question is: who is buying them?” the bank wrote, noting that its analysis relies on Tokyo Stock Exchange trading data by investor category.
According to Morgan Stanley, foreign investors have been the main source of support. “Foreign investors are a key driver of Japanese equity performance, pushing the market higher,” analysts said.
The bank added that their buying has coincided with significant upward momentum in benchmark indices.
In contrast, retail participation has moved in the opposite direction. “Individuals, who have a strong negative correlation with foreign investors, have been net sellers,” Morgan Stanley observed.
This is said to mirror a recurring pattern where overseas inflows crowd out domestic retail investors.
Corporates are reportedly playing a stabilising role in the market. The bank found that they have been consistent net buyers during the latest run-up. Meanwhile, other institutional categories have gone the other way. “Investment trusts and trust banks have been net sellers,” the note said.
Morgan Stanley also flagged an uptick in activity that remains harder to pinpoint. “Although the underlying players are unclear, proprietary cash equity buying has increased since August,” analysts added, suggesting that part of the recent demand may reflect positioning by securities firms and other financial institutions.
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