Japan’s Stock Market is Experiencing a Bullish Run
Japan’s stock market has been on a bullish run, with the Nikkei 225 index hitting its highest level in more than 30 years in February 2021. The index has surged by around 80% since its pandemic-induced low in March 2020. This impressive performance is attributed to a combination of factors, including economic recovery, favorable monetary policies, and robust corporate earnings. In this article, experts like Kavan Choksi will discuss how investors can take advantage of the current boom in Japan’s stock market.
Invest in Exchange-Traded Funds (ETFs) that Track the Nikkei 225 Index
One of the easiest ways to invest in Japan’s stock market is through exchange-traded funds (ETFs) that track the Nikkei 225 index. The Nikkei 225 index is a benchmark stock market index for the Tokyo Stock Exchange, and it represents the top 225 blue-chip companies in Japan. There are several ETFs that track the Nikkei 225 index, such as the iShares MSCI Japan ETF (EWJ), the WisdomTree Japan Hedged Equity Fund (DXJ), and the SPDR Portfolio S&P 500 Japan ETF (SPJP). These ETFs provide investors with exposure to a diversified portfolio of Japanese companies, and they offer a cost-effective and convenient way to invest in Japan’s stock market.
Focus on Small-Cap Companies
Investors looking to capitalize on the boom in Japan’s stock market should also consider focusing on small-cap companies. These companies tend to have higher growth potential than their larger counterparts, and they are often overlooked by larger investors. Moreover, many small-cap companies in Japan are benefiting from the country’s economic recovery and the government’s efforts to promote domestic tourism. One way to invest in small-cap companies in Japan is through the iShares MSCI Japan Small-Cap ETF (SCJ), which tracks the performance of small-cap Japanese companies.
Look for Undervalued Companies
Another strategy for investing in Japan’s stock market is to look for undervalued companies. Despite the bullish run, there are still undervalued companies in Japan that are trading at attractive valuations. These companies may be overlooked by the market, but they have the potential to deliver significant returns to investors. Investors can identify undervalued companies in Japan by analyzing their financial statements, growth prospects, and market trends. Moreover, investors can use stock screeners and other tools to filter stocks based on their valuation metrics, such as the price-to-earnings ratio (P/E ratio) and price-to-book ratio (P/B ratio).
Consider Investing in Technology and Healthcare Sectors
Investors looking for sectors that are poised for growth in Japan’s stock market should consider technology and healthcare. These sectors are benefiting from favorable macroeconomic conditions and changing consumer behavior. Japan’s aging population is driving demand for healthcare services and products, while the government’s push for digitalization is boosting the technology sector. Investors can gain exposure to these sectors through ETFs, such as the iShares MSCI Japan Information Technology ETF (EWJ) and the iShares MSCI Japan Healthcare ETF (EWJH).
Japan’s stock market is experiencing a bullish run, and investors can take advantage of this boom by investing in ETFs that track the Nikkei 225 index, focusing on small-cap companies, looking for undervalued companies, and considering investing in the technology and healthcare sectors. However, investors should also be aware of the risks associated with investing in Japan’s stock market, such as geopolitical tensions, currency fluctuations, and regulatory changes