The Unstable Nikkei Now Progresses to the Brighter Side

Gold Prices, Expected to Move Down Further as USD Rises More
Gold Prices, Expected to Move Down Further as USD Rises More

Gains in the earnings estimates for companies in Japan is much faster, when compared to the overall Asian stock market. This is enough to push traders to buy Nikkei, in spite of its instability in recent times.

The benchmark for Japan, Nikkei 225, has plummeted by 16% from its year-to-date high and traded at 2% lower at 13,072 on Wednesday. There is a disappointment on the Bank of Japan’s non-involvement against calming the unstable bond market.

Strategists, meanwhile, stick to their targeted expectation of 16,000 for this benchmark by the end of 2013, which will indicate 20% advancement from the ongoing level.

The recent volatility in equities and bonds caused no harm to the long and medium term financial growth outlook and no downgrade for the corporate earnings growth viewpoint. For the first quarter, January to March, the economy of Japan advanced by 1%, from the actual speculated estimate of 0.9%.

Last month, the tech giant in Japan, Toshiba, speculated a 34% rise in operating profits to USD2.6 billion for the ongoing fiscal year. Canon, on the other hand advanced its forecast for 2013 by USD300 billion in April, due to a weakening yen.

Leading analysts have speculated to remain bullish for the leading markets in 2013, due to the pursuing of investor friendly policies by the central bank. BOJ in April proclaimed to impel USD1.4 trillion into the economy in less than two years and to twice its financial base to meet with the 2% inflation rate target by 2016. The BOJ renewed its commitment this Tuesday.

Seeing the 30% equities rise, analysts speculate a 60% year for the Nikkei. The Nikkei is expected to end the year better than where it was when the sell off began on May 22.

From a wider view, analysts show interest to remain in markets, where the financial policies will contribute in making money in the equity market.
Top picks for the Nikkei would be those that have benefitted from domestic reflation and corporate investment, rather than exporters, from outside Japan, who benefitted from the weakening yen.