Even the Japanese Are Ignoring Japan

"People seem not to see that their opinion of the world is also a confession of their character."

Ralph Waldo Emerson (1803 - 1882)

Yet another sell-side brokerhas sounded the death knell on the Japanese equity markets. Welcome to the party 2 years too late buddy!

Analyst Nishizaki of HSBC in a recent note was sour on the Japanese economy for a number of reasons: (1) Corporate governance (which was already appalling) has deteriorated (2) Government policy mistakes appear to be tipping the economy into a recession (3) Japanese domestic funds are selling Japanese stocks and (4) Foreigners have been net sellers of US$24 billion worth of Japanese stocks since August 2007. According to the report foreigners now account for 70% of the transaction flow on the TSE.

The net result has been that the TOPIX Index is down 24% since late April to make the second consecutive fiscal year of negative returns.

With such negative vibes hanging over Japan look for an increasing number of hedge fund managers to use the market and sectors of that market as shorts for their pan-Asian portfolios. Fund of hedge fund managers take note; you too should be looking around for dedicated short sellers of Japanese equities. Then again, even that might now be too late. Mahalo.