Investors Face Limited Escape Routes During Japan’s Long Holiday
Investors Face Limited Escape Routes During Japan’s Long Holiday
(Bloomberg) -- With Japan set for its annual spring holiday season, investors may face difficulty adjusting positions in response to coronavirus-related newsflow, which could heighten volatility for the next few weeks.
This year’s “Golden Week” includes four official holidays, and market closures, on April 29 and May 4-6. What is usually one of the country’s most popular vacation periods will be different this year, as businesses remain closed and non-essential travel basically nonexistent due to the pandemic. Adding to concerns is Tokyo Governor Yuriko Koike’s proposal for large companies to add holidays to Golden Week to encourage people to stay at home for an extended period.
The Tokyo Stock Exchange’s operator has pledged to keep the market operating even in the event of a lockdown. But even the regular four holidays may complicate investment actions at a particularly sensitive time.
Among particular news that market participants may want to react to is the national government’s decision on whether to extend its state of emergency order, which is expected to be made during Golden Week. Observers are divided over whether the extension of emergency measures would be positive or negative for the stock market. The four holidays also fall in the middle of the nation’s most important earnings season of the year.
Here is what some market participants had to say:
Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co.
- Sees no chance of economic activity restarting in May-June as the number of cases in Japan continues to increase. “Japan is behind schedule as compared with other countries that have rigorously tested cases.”
- With companies postponing results and shareholder meetings, investors don’t have a schedule to determine company valuations.
- The Japanese stock market may slump again in August-September, with the Nikkei 225 possibly dipping below 17,000 yen, when economic data shows impact of the pandemic in April-June period.
Hiroshi Matsumoto, head of Japan investment at Pictet Asset Management Ltd.
- Whether or not the Japanese government extends the emergency order will be key; an equity sell-off may occur if the order is extended for another month.
- “The government is asking us to refrain from unnecessarily going outside -- I think a similar idea goes for investors: they may have to make sure they don’t have unnecessary positions ahead of the long holiday.”
- Retail investors and hedge funds may be able to use overseas futures trading, but domestic institutional investors have a harder time with such orders due to compliance issues over working from home.
Takeo Kamai, head of execution services at CLSA Securities Japan
- Expecting to see “some unconventional moves” in equities due to a new “stay at home and have nothing to do so let’s get involved with the stock market” type of investor.
- Outside of commodity trading advisors and macro hedge funds that react to headlines, trading will be limited. Foreign traders are likely to stay on the sideline or just readjust portfolios.
- General consensus is that the government will extend the state of emergency; if order is lifted it may trigger downside risk for the stock market.
Justin Tang, head of Asian research at United First Partners
- Investors will likely close some positions in the run-up to the holidays, or at least increase hedges against their portfolios.
- Emergency order in Japan “lacks teeth” and investors are aware of this so it won’t affect investment decisions.
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