Japan Looks to SoftBank to Salvage a Rough Week

(Bloomberg) -- It’s been tough sledding for traders in Japan since getting back to work after their super-sized Golden Week holiday, with stocks on track for their worst week this year.

The benchmark Topix index has slumped more than 4%, followed close behind by the Nikkei 225, despite Japan having had one less trading day than the rest of Asia. The pair are among the world’s worst-performing major stock indexes this week, after China and Hong Kong. With nowhere to hide in Asia amid a re-escalation of the trade war, the broader MSCI Asia Pacific Index has mirrored the drop in Japanese stocks.

IndexReturn This Week
CSI 300 Index-7.5%
Hang Seng Index-3.9%
Topix Index-4.2%
Nikkei 225-4%
MSCI Asia Pacific Index-3.2%

If there’s a silver lining in this sea of red, it’s a potential buying opportunity for Japan bulls. Valuation and positioning in Japanese stocks “have come down to the point where the upside risk of Japan equities can’t be ignored and the downside risk relative to other markets has diminished,” said Shusuke Yamada and Tony Lin, strategists with Bank of America Merrill Lynch in a note to clients.

“Japan’s earnings fundamentals remain sluggish, but we think this has been increasingly priced in through de-rating and underweighting by investors,” the strategists said.

Full-year earnings per share estimates for the Topix, at just under 130 yen ($1.18) have come down to match the bank’s more cautious expectations of 129 yen, while BofAML’s fund manager survey also found investors have been the most underweight Japanese equities since 2016, the strategists said.

Softbank Savior

Also lining up as a potential savior for equity investors is Masayoshi Son’s SoftBank Group Corp., set to report its latest quarterly earnings today. The telecommunications giant is up 57% this year, the top-performing stock on the Nikkei 225 Index, data compiled by Bloomberg show.

Anthea Lai, technology analyst with Bloomberg Intelligence, said in a May 6 note SoftBank’s 16% stake in Uber Technologies Inc. means the company could record as much as $1.3 billion in unrealized gains, based on the top of the ride-sharing company’s IPO valuation at $84 billion.

And while SoftBank’s operating profit may weaken in the quarter to single digits, completing its deal to buy additional shares of Yahoo Japan Corp. could lift fiscal 2020 operating profit growth to almost 24%, she said.

Stock-Market Summary

  • MSCI Asia Pacific Index ex-Japan down 1.3%
  • MSCI Asia Pacific Index down 1.2%
  • Japan’s Topix index down 1.3%; Nikkei 225 down 1%
  • Hong Kong’s Hang Seng Index down 1.9%; Hang Seng China Enterprises down 1.9%; Shanghai Composite down 1.3%; CSI 300 down 1.9%
  • Taiwan’s Taiex index down 1.5%
  • South Korea’s Kospi index down 1.9%; Kospi 200 down 2%
  • Australia’s S&P/ASX 200 up 0.4%; New Zealand’s S&P/NZX 50 up 0.3%
  • India’s S&P BSE Sensex Index down 0.3%; NSE Nifty 50 down 0.3%
  • Singapore’s Straits Times Index down 0.4%; Malaysia’s KLCI down 0.7%; Philippine Stock Exchange Index down 1.7%; Jakarta Composite down 0.6%; Thailand’s SET up 0.1%; Vietnam’s VN Index down 0.1%
  • S&P 500 e-mini futures down 0.5% after index closed down 0.2% in last session

©2019 Bloomberg L.P.