Brave New World: Nikkei back to levels seen 30 years ago. What does it mean?

Nikkei, equity markets, earnings, markets, reforms

Nikkei surfaces back to levels seen 30 years ago

  • Nikkei still needs to gain almost 30% to surpass its record highs last seen in 1989; before the index went on to lose more than half its value.
  • Japanese equity markets are trading at a lower PE multiple than S&P 500, despite their stronger earnings & lower interest rate. The Topix trades at 14 times forward earnings, compared to 21 times for the S&P 500.
  • The recent changes on the political front (PM Yoshihide Suga resignation) could help step up the markets further as a new administration brings prospects of spending boost and targeted reforms
Nikkei, equity markets, earnings, markets, reforms

  • On Valuation front four tech firms — Apple, Alphabet, Amazon and Facebook — with a combined market cap of $7.3tn are now worth more than all 2,187 companies that make up the Topix stock market in Tokyo (Source: Insider weekly).
  • There are Japan focused ETFs listed in the US with exposure to listed companies operating in Japan (available for investment by Indian citizens)
Nikkei, equity markets, earnings, markets, reforms

Energy – The Shortfall that no one is talking about, the shortfall that is getting serious

  • Regions like North Asia, Europe and China compete over finite supply of fuels like coal & natural gas used to heat household & power factories. This has pushed the price of natural gas & electricity to record levels fueling inflation and threatening to stall the economic recovery; just when businesses reopen and people return to office.
  • Demand for heating will jump when temperatures turn colder over the next few months, which could trigger power rationing.
  • Utility companies are passing on price rise to consumers, at the same time everything from food to transportation costs are also rising due to supply chain issues; creating challenging environment for politicians trying to gather support for energy transition.
Nikkei, equity markets, earnings, markets, reforms

  • Rising energy prices is inflationary, so unless we see these prices falling; the entire argument of calling inflation ‘transitory’ goes for a toss.
  • There are Energy focused ETFs listed in the US with focus on companies involved in exploration/production & distribution (available for investment by Indian citizens)
Nikkei, equity markets, earnings, markets, reforms

Real Assets vs Financial Assets ratio the lowest since atleast 1925

  • Last two bottoming’s in 1999 & late 1960s, corresponded to the start of major commodity bull markets & upward inflation pressure.
  • Real assets are positively correlated with inflation and interest rates, unlike financial assets like stocks and bonds. These assets have seen lower returns and lower volatility over the past 5 & 10 years as inflation fell to the lowest average levels seen since 1960s.
  • Pumping of trillions of dollars into the economy has led to secular turning point on Inflation.
  • An uptick in inflation may lead to rising rates which will weigh on stock returns for the next decade.
  • Will we see the traditional 60:40 Equity Debt allocation changing in this scenario? Lets watch…
Nikkei, equity markets, earnings, markets, reforms

The process of ending massive money printing has started

  • ECB is the second giant to taper. While, it is way behind the Bank of Japan, the Bank of Canada, the Bank of England, the Reserve Bank of New Zealand, and the Reserve Bank of Australia; but, still ahead of the Fed.
  • This is in line with the consensus among central banks, that QE needs to end before interest rates can be hiked, on the rationale that QE pushes down long-term rates, while raising policy rates pushes up short-term rates, which would wreak havoc on the yield curve
Nikkei, equity markets, earnings, markets, reforms

  • What’s taking the Fed so long and when will it stop QE & hike rates? This Week FOMC gave us a clue.
  • Having said that, is hard to miss the positive correlation between Equity markets & Global liquidity since the beginning of present series of QE.
  • It is so easy to see the bubble but waiting for it to unwind takes years & it is the waiting that is the hardest part
Nikkei, equity markets, earnings, markets, reforms

Evergrande: First casualty of rising costs?

  • China has been in a property bubble for years, with home price to income ratios over 30x (this ratio is 4x in U.S) & development of numerous vacant (ghost) cities around the country leading the value of Chinese real estate climbing to ~$52 trn.
  • Real estate has been the go-to investment for retail investors (~70% of portfolio composition) in China for decades with 90% home ownership rate.
  • Crisis begin as Chinese government tightened leverage restrictions on its exuberant property market. The second casualty factor was immense increase in construction material costs due to rising inflation led by supply shortages.
  • Chinese property developers have thin profit margins and use tremendous debt, so any surprise increases to supply prices makes it
  • How will Chinese leadership react to this & whether or not the effect of this will spread to global markets.
  • Chinese smart money has led foreign investments in U.S homes over past decade with more recently aggressive buying seen in U.S Farmland.
Nikkei, equity markets, earnings, markets, reforms

Internet Explorer Channel Network
News Related

OTHER NEWS

UAE has begun a new phase in recovery from Covid-19: Sheikh Mansoor

© Provided by Khaleej Times UAE has begun a new phase in recovery from Covid-19: Sheikh Mansoor The UAE has begun a new phase in the recovery from the pandemic, ... Read more »

Johor hospitality sector all smiles as travel curbs lifted

© Provided by New Straits Times JOHOR BARU: The sap is once again flowing in the veins of the hospitality sector in Johor, with the lifting of the interstate travel ... Read more »

Sharjah: First-of-its-kind luxury glamping destination open

© Provided by Khaleej Times Sharjah: First-of-its-kind luxury glamping destination open The Mysk Moon Retreat, Sharjah’s first-of-its-kind luxury glamping destination, is now welcoming guests and accepting bookings. The retreat offers ... Read more »

UAE: 41,271 Covid vaccine doses administered in 24 hours

© Provided by Khaleej Times UAE: 41,271 Covid vaccine doses administered in 24 hours The UAE has administered 41,271 doses of the Covid-19 vaccine in the past 24 hours. The ... Read more »

Dubai: Parents, students plan for half-term school holidays

© Provided by Khaleej Times Dubai: Parents, students plan for half-term school holidays Many schools have sent our circulars for mid-term camps that offer a range of extra-curricular activities. Authorities ... Read more »

Look: Slovakia unveils its first hydrogen car at Expo 2020 Dubai

© Provided by Khaleej Times Look: Slovakia unveils its first hydrogen car at Expo 2020 Dubai The Slovakia pavilion at Expo 2020 Dubai has unveiled the country’s first hydrogen car ... Read more »

Expo 2020 Dubai: Sheikh Maktoum meets Slovak prime minister

© Provided by Khaleej Times Expo 2020 Dubai: Sheikh Maktoum meets Slovak prime minister Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai and Deputy Prime Minister ... Read more »

Man charged with attempted murder after stabbing incident in Rygge

A man in his 30s has been charged with attempted murder after another man was stabbed in a hotel in Rygge on Friday night. The victim was flown to Ullevål ... Read more »

Bhuvneshwar's form a concern? 'Not at all, his experience will be priceless' says Kohli

© Getty Images Virat Kohli backs Bhuvneshwar Kumar to come good at the T20 World Cup © Getty Images Bhuvneshwar Kumar might have endured a rough time at IPL 2021 ... Read more »

Barcelona host Valencia in high-voltage La Liga clash

© Provided by The Times of India KOLKATA: FC Barcelona will host Valencia on Sunday at Camp Nou stadium with 100 percent permitted capacity for the first time since March ... Read more »

Virat Kohli reacts as Rahul Dravid reportedly set to succeed Ravi Shastri as India's head coach

© Provided by WION The skipper of the Indian cricket team Virat Kohli on Saturday (October 16) has responded to the reports that former captain Rahul Dravid is set to ... Read more »

Trump Switches Arizona Audit Focus to Pima County, Demands Loss to Biden Be Decertified

After the controversial audit of Arizona’s Maricopa County, former President Donald Trump has now switched his attention to calling for a review of the southwestern state’s Pima County’s election results. ... Read more »

Report of sexual assault on Charlotte school bus under investigation

Police are investigating a report that a 13-year-old girl was assaulted on her school bus in Charlotte on Wednesday. In a message to parents on Friday, Randolph Middle School Principal ... Read more »

MPs continue to hold constituency surgeries after David Amess killing

Photograph: Dominic Lipinski/PA It was business as usual as MPs held constituency surgeries as normal less than 24 hours after the death of Sir David Amess. Amess was killed while ... Read more »

It's the way he tells them: Willie Carson has The Queen in stitches at Ascot

The Queen laughs with Willie Carson at Ascot for The QIPCO Champions Day Meeting – Kevin Bruce It is, of course, protocol that the Queen's private conversations should remain just ... Read more »

Police investigating 'unexplained' death of South Australian woman

Police are investigating an “unexplained” death after a woman’s body was found in the South Australian town of Gawler South. Police and paramedics were called to a home in Seventh ... Read more »

Tom Glavine, Ric Flair, Doug Flutie to join Trump for Herschel Walker event

Hall of Fame pitcher Tom Glavine, former NFL quarterback Doug Flutie and pro-wrestler Ric Flair are among those joining former President Donald Trump for a fundraiser in December for another ... Read more »

UK weather: Snow to fall in days with mercury to drop below ZERO as Arctic air blasts Britain

SNOW is set to hit the UK in days with the mercury dropping below zero as a blast of Arctic air sweeps into Britain. The fluffy white stuff could fall ... Read more »

M6 delays: Massive recycling plant fire sparks huge delays on motorway as thick black smoke spews into the air

A MASSIVE recycling plant fire has sparked huge delays on a nearby motorway with thick black smoke billowing into the air. More than 50 firefighters are tackling the blaze on ... Read more »

UK Covid daily cases top 42,000 for fourth day in a row with another 148 deaths recorded

THE UK’S daily Covid cases have topped 42,000 for the fourth day in a row. A further 43,423 infections have been reported in the last 24 hours – bringing the ... Read more »

OAP, 81, forced to live in darkness without TV as massive 70ft trees block his window and signal

A PENSIONER has been forced to live in darkness without a television signal after massive 70ft trees blocked his window. Barrie Enderby, 81, from Grimsby, has been unable to get ... Read more »

Saisonstart mit Nina Dimitri und Silvana Gargiulo

Am 21. Oktober startet die Klösterli-Saison mit Nina Dimitri und Silvana Gargiulo. Noch hat es eine beschränkte Zahl freier Plätze. © Foto: Michael Trost Nina Dimitri (r.) und Silvana Gargiulo eröffnen ... Read more »

Two workers from Bihar & UP killed in J&K

The bodies of two soldiers were found in Poonch district of Jammu and Kashmir on Saturday, the sixth day of anti-militancy operations in the region. The soldiers–identified as Subedar Ajay ... Read more »

In face of violent crime and COVID trauma, nation can't fall into overincarceration trap

The nation's dual crises – the COVID-19 pandemic and the recently reported rise in violent crime – aren't unrelated. America experienced a great shock, and jails stand ready to fill ... Read more »

Police probe whether David Amess specially targeted for killing

Photograph: Alberto Pezzali/AP Counter-terrorism detectives are investigating whether David Amess was specifically targeted for attack by a man who stabbed the MP multiple times, then waited for police to arrest ... Read more »

Dennis Schroder, Jimmy Butler get chippy in final preseason game

The final preseason game between the Boston Celtics and Miami Heat was highlighted by an intense personal battle featuring Dennis Schroder and Jimmy Butler. © Paul Rutherford-USA TODAY Sports Boston ... Read more »

New Orleans picks developer for empty amusement park site

NEW ORLEANS (AP) — New Orleans has chosen a developer to revitalize the site of a former amusement park that has been vacant since Hurricane Katrina struck in 2005. © ... Read more »

Bills have NFL's largest margin of victory during a four-game winning streak since 1953

How dominant have the Bills been over the last week? More dominant than any NFL team has been over four games in almost seven decades. © Provided by NBC Sports ... Read more »

Hertz files for a new IPO

Hertz is going public again. © Cindy Ord/Getty Images NEW YORK, NEW YORK – MAY 23: An exterior view of Hertz Car Rental during the coronavirus pandemic on May 23, ... Read more »

A priest tried to give the last rites to the murdered British MP who was a devout Catholic, but he was denied access because it was a crime scene, police says

© Zoe Norfolk/Getty Images David Amess MP in the Prime Ministers Office at the House of Commons on October 16,2016 in London, United Kingdom Zoe Norfolk/Getty Images Conservative MP Sir ... Read more »

Cam Newton reportedly received COVID-19 vaccine in attempt to get back in NFL

Former New England Patriots quarterback Cam Newton wants back into the NFL. After months of wavering, Newton reportedly received the COVID-19 vaccine, according to Mike Garafolo of NFL Network. That ... Read more »

Conservatives resign from Biden's Supreme Court packing commission

Two members of President Joe Biden’s commission tasked with studying the issue of adding new members to the United States Supreme Court resigned on Oct. 15, 2021. Kevin Dietsch/Getty Images ... Read more »

Hochul allies see victory in crowded gubernatorial primary

Jumaane Williams is one of Hochul’s allies. Getty Images Gov. Hochul is hoping to be the last woman standing in the 2022 Democratic gubernatorial primary, with her allies banking on ... Read more »

Clean energy program likely to be dropped because of Manchin's objections

The Clean Energy Performance Program, the linchpin of President Biden’s proposed climate change legislation, is likely to be dropped from the Democrats’ spending bill because of opposition from Sen. Joe ... Read more »

Colombia Neuters Drug Lord Pablo Escobar's Legacy: His Hippos

Colombia has embarked on a campaign to rid the country of late drug lord Pablo Escobar’s wildest legacy. © Provided by The Daily Beast Albeiro Lopera/Reuters Not cocaine—but hippos. Authorities ... Read more »

All Kito and Kanna locations in Genshin Impact

After finishing the Through the Mists quest in Genshin Impact, players will be able to find strange spirits all over the islands. They will all have some simple tasks that ... Read more »

NHL 22: Does Be a Pro have Free Agency?

Be a Pro’s handling of Free Agency has been a long-standing complaint from the NHL community for years. Once the series revamped Be a Pro and leaned heavier into RPG ... Read more »

TOTW 5 Predictions FIFA 22: Who's Getting in?

TOTW 5 predictions for FIFA 22 are coming in as leagues around the world returned to action following the international break. The Premier League especially returned with a bang with ... Read more »

Lawmaker's killing wounds 'British tradition' of openness

1 / 6Britain Lawmaker AttackedA note is seen on a photograph showing slain member of Parliament David Amess, right, placed by a floral tribute near the scene where Amess was ... Read more »

Saudi Arabia Appoints New Hajj, Health Ministers

Saudi King Salman bin Abdulaziz has relieved Health Minister Tawfiq al-Rabiah from his post and appointed him as new Hajj minister; state media reported on Friday, citing a royal decree. ... Read more »